At one point or another, you probably took part in crowdfunding efforts long before the days of online campaigns. Maybe it was selling chocolate chip cookies at the local bake sale or buying lemonade from an entrepreneurial child on a hot summer’s day.
Crowdfunding refers to the process of raising funds for a particular business, charitable cause, or specific project, like a startup business venture. There are many crowdfunding websites to consider, such as Kickstarter and Indiegogo, that allow you to collect funds from individual donors, but which crowdsourcing platform is best to fund your business?
The benefits of crowdfunding platforms
There are many advantages of using a crowdfunding platform to raise capital. For starters, the platform acts as a virtual piggy bank that holds all of the funds raised, rather than placing the responsibility on one individual to be the keeper of the physical donations.
Here are five benefits to using a crowdfunding platform:
Access to capital
Launching a crowdfunding campaign can be a great way to fund a business venture. By creating a crowdsourcing campaign, entrepreneurs can attract future investors with the promise of delivering the final product. Typically, the entrepreneur can ask for a percentage of the deposit (or donation) upfront, and once capital is raised, all contributors receive the final product.
Crowdfunding campaigns have the potential to be wildly popular on social media. After creating the campaign, share it on your website and social media channels. Chances are people in your network will share the link, and that has the potential to spiral into even more engagement! Most crowdfunding platforms also allow you to add videos or photos to make them more engaging.
Rather than asking for a straight cash donation, crowdfunding allows donators to see exactly where their funds are going and how they are being used. Many crowdfunding campaigns also enable the owner to set a financial goal. As the donations pour in, the progress towards that amount is visibly tracked, which allows potential backers to keep an eye on the status of your project.
Easier than a loan
Applying for a loan means getting pre-approved by a financial institution and possibly being rejected if your business credit isn’t in good standing. Crowdfunding is one of the easiest ways to raise money to support a startup business. The entrepreneur simply selects which platform they’d like to use and sets up the campaign.
It’s free to set up
Perhaps the biggest benefit of all, starting a crowdfunding campaign is totally free! On platforms with no fees, the entrepreneur can only access the funds when the total goal is met. If the total amount of the goal isn’t reached, there are no penalties, and each of the backers has their investment or donation returned to them.
7 things to consider before selecting a crowdfunding platform
Crowdfunding is an excellent way for entrepreneurs to pinpoint their target audience, raise financial capital, generate exposure for their business idea, and eventually execute a business plan.
There are plenty of crowdfunding platforms out there, but deciding which one will best support your business can be tricky. Here are seven things to consider when deciding how to choose the right platform:
1. Unique crowdfunding goals
Before you sign up for a platform, make sure the end goal of your campaign is clear. At this stage, it might be helpful to create a business plan or strategy. Not all crowdfunding platforms will be a good fit, so it’s important to do your research and see which ones could be a good fit based on crowdfunding projects that they have supported in the past.
2. The purpose of the campaign
What is the purpose of your crowdfunding campaign? Crowdfunding isn’t as simple as setting a target and relying on the kindness of strangers to meet your financial needs. Once you’ve selected a platform, you’ll be able to create a description of your project, as well as upload any videos, photos, or additional links to support your idea. The most successful crowdsourcing campaigns follow a strict business plan that defines the project and clearly identifies