Crowdfunding: The modern way to get your business off the ground

Crowdfunding. What is it? Can anyone do it? How do you do it? Many people have never heard of crowdfunding before. For those that have, a large majority don’t understand its various implications.

As you can probably deduce from the name, crowdfunding is when a group of people give money to back an endeavor, including business startups and volunteer work. Fundera specifically describes crowdfunding as “the monetary efforts of a collective of individuals who support a business venture or project.”

Crowdfunding is unique in that everyone has the ability to “pitch” their enterprise to almost an endless amount of potential investors. Platforms such as Kickstarter and GoFundMe allow entrepreneurs to broadcast their ideas across the world with links to donate.

With over 600 crowdfunding platforms and billions of able investors in the world, finding funding for your project has never been easier. What’s more, since you can reach so many people, even small donations can make the difference. If 1,000 people decide to donate just $5, that’s already $5,000 to put towards your business!

While obtaining fiscal assistance is far more painless than in previous eras, there are some challenges. First, let’s discuss essential aspects of how to crowdfund. If you’d like, jump to the infographic below for a general crowdfunding overview.

6 Crucial steps to starting a crowdfund

1. Choose the crowdfunding platform wisely

Different platforms are geared toward various types of crowdfunding, i.e. differences across industries. Audiences will diverge based on their interests, jobs, and hobbies. Therefore, you should ensure that the platform you use will attract your desired audience.

2. Drive intrigue and excitement for your idea

Now that you’ve determined your audience it’s time to attract them. Target them with your messaging and visuals. As the saying goes, a picture is worth a thousand words. Give potential investors a brief description and use imagery to convey your idea and your values.

3. Show people the value

In addition to the intrinsic reward that is your project’s success, offer another valuable reward. For example, give every donator a t-shirt or koozie with your logo on it. If such rewards are too costly, offer large prizes for the top three donors. Furthermore, rewards can be used to incentivize people to support you. Don’t forget to check your projected income statement (specifically expenses) before you promise anything.

4. Give multiple donation options

If there are limited, fixed donation options, you may find that people who intended to donate will actually choose not to do so. If someone wanted to invest $10, but you only give them the option for $25 or $50, they will likely avoid donating at all. At the bare minimum, be sure to include low, middle, and high options.

5. Make it shareable

Often crowdfunding platforms will generate a link that you can paste on social media. This enables your friends and family to share your crowdfund, helping you get the word out at an exponential rate. For those that stray away from social media, you can email them the link.

6. Develop your PR strategy

Reach out to bloggers that aline with your brand to see if they will share your idea and crowdfunding link. If your project is especially innovative or influential, reach out to the press to inquire about press coverage. Create a succinct, compelling pitch that can be communicated to multiple audiences.

Foreseeable challenges

Crowdfunding campaigns take a lot of dedication and perseverance to build. Believe it or not, your crowdfunding initiative is not like a fine wine — it will only get worse the longer it sits on a rack unattended.

Only around 30% of crowdfunding campaigns are successful in the terms of hitting their goal, because most entrepreneurs fail to plan and do the necessary pre-launch work.

Differentiation is a monster of a feat in itself. The market is crowded and an infinite amount of things have already been ideated and pursued. Ensure that your idea is unique to effectively break through the clutter.

Be wary of fees. Most crowdfunding platforms take a percentage of the funds raised on top of a credit card processing fee.

Consider acquiring a trademark and/or patent pending if your idea is business related. Having investors sign non-disclosure agreements can also be a good idea. Crowdfunding allows the world to see your idea, and if you’re not careful someone can steal it.

Main takeaway

Crowdfunding can be a useful tool when trying to gain backing for an entrepreneurial undertaking, but it’s only effective when properly planned and maintained.

Check out the infographic below for more insights regarding different types of crowdfunding, benefits, and statistics.