Crowdfunding is a way of raising money for a business or a charity. Individuals and organisations donate or invest in crowdfunding projects for a potential reward or profit. Even though this can be a risky investment, it’s an excellent way for start-ups to build up capital quickly to help get their business idea off the ground.

If you want to raise money through crowdfunding, you need to post the details of your project on a crowdfunding website. It is an excellent alternative to seeking funds from banking institutions. People and organisations who contribute to your project need to be kept in the loop about the progress of your project.

There are several crowdfunding types, and the way it works is that you register with a crowdfunding website to pitch your project or to view different pitches. This is an increasingly popular way of raising funds and the number of available crowdfunding platforms is rising, however it’s important that the one you choose is of high-quality. You’ll also need a sound and solid strategy to ensure you reach your target within the selected time-period (if appropriate).

How it works

There are countless crowdfunding platforms worldwide that you can register with and the average length of a crowdfunding project is approximately nine weeks. When you post a campaign, you need to provide the following details;

– How much money you want to raise
– How much you have raised so far
– How long the pitch is open for
– What the funds will be used for
– How many people have invested so far
– What investors will receive in return for investing

The top three types of fundraising campaign you can run with crowdfunding platforms include;

“All or nothing”

In this case, you only have access to all of the funds if the target amount was reached. Your investment only goes forward if the full amount was raised within the stipulated period. Failure to raise the full amount results in you having to give up the funds that you did manage to raise. Remember to set realistic goals [1] to avoid having to relinquish the money you raised in the time-period. Setting targets that are too high will hamper your fundraising results.

“Keep it all“

Unlike the previous campaign, in this case, you get to keep all of the funds raised, no matter how small. This applies even if you had set a goal and failed to reach it.

“Just giving”

This campaign has no time limit as it exists in perpetuity. You can take all the time you need to raise the amount you need, and outside entities can fundraise on your behalf.

Update your investors

Just like any other campaign, you need to follow best practices to achieve the most optimal results. When you are crowdfunding for business expansion, for instance, investors need to know exactly what you have in mind. Investors have given you their money with risks of crowdfunding in mind; the least you can do is make sure they know about the good and bad news.

Attract more contributors

As a small business owner, you need all the help you can get; that is why you need to keep attracting investors [2]. A great way of achieving this is through being as transparent as possible. Investors want to put money in a business they can trust.

Consider incorporating a feedback loop for all investors because they might understand aspects of your business you haven’t thought of. You can use investors’ ideas to tailor your product and services to cater to the need of an under-served market.

Promote your campaign

This needs to begin even before the campaign launches. Building excitement around your project through social media platforms drives outside investors to your campaign page.

Once the campaign begins, investors will require social proof, and you can achieve this with consistent updates on social media.

In summary…

Crowdfunding presents your business with quick capital. It is an excellent way of raising funds for business, but it requires diligence on your part. Now that you know how crowdfunding works, consider leveraging it for your upcoming fundraising campaign.

[1] https://www.growthbusiness.co.uk/10-steps-to-crowdfunding-your-business-2475337/

[2] https://www.telegraph.co.uk/connect/small-business/finance-and-funding/crowdfunding-tips-for-smes/

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