Starting a new business is exciting. It’s probably something you’ve dreamed about for years, and now, after months spent nurturing the perfect concept and developing the best business plan, you’re only short of of one thing: funding. Luckily, there are several ways to raise the much needed capital, not least of which is crowdfunding, a clear go-to for many serious entrepreneurs.
While not necessarily an altogether new idea (similar in concept to crowdsourcing) crowdfunding has seen a surge in the last three years. Why? Because it gives entrepreneurs the ability to quickly raise funds for their startups while still allowing them to retain complete control of the businesses. But there’s a catch: the crowd-funded enterprise has to have real appeal to attract investors. These benefactors often receive special rewards in return for their patronage, but that not the main reason they donate. The real draw to crowdfunders is the opportunity to be apart of something.
If your business has that certain something, then you might want to consider listing your venture on a platform such as KickStarter, IndieGoGo, or Thundafund. These allow the general public from your nearest and dearest to people who just stumbled upon your page and liked the concept – to help you grow your company.
Once you have done your research and decided that crowdfunding is the route you’d like to take, here's what you'll need to do:
You want to package your idea in a way that will really speak to people. Craft it beautifully, plan it thoroughly, explain it fully (give lots of detail) and make sure that your idea stands out from the crowd. Look at other campaigns and make sure yours is different. More about this in a minute.
You want to set a realistic financial goal – something you think you can reach through crowdfunding. Your business plan should include a cashflow plan that shows when you expect to break even and start turning a profit.
Again, you need to keep your crowdfunding timeline realistic. You can choose anything from a couple of days up to 60 on most sites, with 30-50 days being the recommended timeline. Think all the options through and then choose the best one for your campaign.
Choosing a crowdfunding site is one of the most important steps in the process. While many of them may share a lot of similarities, they tend to be targeted at specific audiences, and it’s important that you know where to find yours. You also need to keep in mind that each site might have a specific set of terms and conditions. Be sure to familiarise yourself with these to ensure that when you choose a platform, you know exactly what to expect.
You already know that when you pitch your idea, it needs to be engaging and detailed in explaining the benefits of supporting your startup. But you also need to convince potential benefactors that your product or service will sell. Here, you need to focus on the problem your business, idea or product is going to solve. How will it make people’s lives easier? And why would people want to buy it? Make sure you communicate your unique selling point clearly from the get-go.
As we mentioned before, you need to decide on a realistic financial goal for your crowdfunding campaign. The best way to do this is to break it up and do it in bite-sized chunks. Focus on particular parts of your business, specific phases, or smaller goals that you need to reach to get things off the ground. The chances of you getting all the funding you need for your project in one crowdfunding campaign is pretty slim.
It’s going to be very hard to convince people to fund you if no one else shows support. People have a tendency to distrust a pitch that’s been up for a week and hasn’t had any interest. The ideal thing is to ensure that you already have some interest and investment in your campaign when you go live.
If you’ve decided that crowdfunding is not the best route for you, don’t worry! There are many ways to fund your business. If you would like to learn more about the world of entrepreneurship, you can sign up for our Money Mailer. In this free monthly newsletter, we serve up articles on topics ranging from saving to borrowing and everything inbetween. If you've ever wanted to know how to ensure a positive cash flow, how to protect your personal finances, or how to improve your credit score, the insights in these articles can leave you wiser, wealthier, and better equipped to make the most of your money.