What’s the real power of the internet? In the past few years, a variety of crowdfunding companies have emerged, making it possible for just about anyone, anywhere to fund anything. If you need to fund something, you simply need to do a little research and planning.
Types of Crowdfunding
Thanks to websites like Kickstarter, crowdfunding has really taken off, making it one of the most popular ways that small businesses, nonprofits and individuals can raise money to support their causes. There are several types of crowdfunding, and if you want to get involved with raising funds for yourself or your business, it’s important to understand the differences in each.
Rewards-Based crowdfunding is typically used by businesses and non-profits to raise donations for a specific project. The donator is usually rewarded with some kind of incentive after donating. Most Kickstarter campaigns are rewards-based.
Equity crowd funding offers the investors a portion of the company’s equity in return for their financial support. When passed, the JOBS Act will make this type of crowdfunding even more popular since it will allow businesses access to up to $1 million in funding.
Debt-Based crowdfunding is a loan-type source that offers individuals and small businesses loans without going through your bank, dealing with high interest rates or running in-depth credit checks. It was made primarily popular through Lending Club, which has advanced millions in loans since its startup in 2012.
Litigation crowdfunding gives individuals an opportunity to raise personal funds for legal disputes. The donations come primarily from peers, as seen with Nova Legal Funding, which offers direct funding with fewer fees.
How to Begin
If you want a successful crowdfunding campaign, it needs to be done properly. Unfortunately, the statistics aren’t high for crowd funders, according to Kickstarter. More than 20,000 rewards-based projects are started each year, but only 20 percent of projects submitted are successful, and the same goes for the other types of crowdfunding campaigns. If you want to find success, use these tips to get your campaign going.
Do Your Homework: Begin by researching the best type of crowdfunding for your company. Use the guide above to determine the type of crowdfunding you or your company needs. Then research the website you’ll be using to determine if it will match the needs of your campaign.
Craft a Compelling Story: When you’re raising money, especially if you’re raising money for yourself or an individual, it’s important to tell a story that will successfully compel your audience to donate to your cause. This requires making an excellent crowdfunding video and a justified summation of why you need the money.
Have A Plan for Your Funds: Most investors won’t give you money if you don’t have a plan for spending it. Offer a detailed explanation of exactly how you will allocate the funds. It’s okay if the numbers are a close estimate. Your investors just want to know that you have a solid plan for the future.
Leverage Social Media: Social media is strongly linked with emotion, and if you can garner support on social media with an excellent crowdfunding video and a compelling story, you’ll have a much better chance of success. Target the bigger social networks such as Facebook and Twitter, and gain the support of influencers to market your campaign to a wider audience.
Creating a successful crowdfunding campaign revolves largely around understanding the basics of crowdfunding and using that knowledge to your advantage. With the right crowdfunding website, a lot of marketing on your part and a little luck, you’ll raise the necessary money in no time.