One of the most basic challenges faced by any business, especially a startup, is how to raise money. Crowdfunding is emerging as a viable way for businesses to raise capital in a short time. There are now a wide variety of crowdfunding platforms, with more appearing every year. Let’s look at what crowdfunding is and how it can be a useful tool for raising money.
What is Crowdfunding?
Crowdfunding is a process where a business, venture or project is funded by a large number of people. While this can theoretically be done using any type of platform, it is usually done online, where it’s easy to reach a large audience.
Crowdfunding campaigns are usually run through popular platforms such as Gofundme, Kickstarter and Indiegogo. Successful crowdfunding campaigns usually entail a considerable amount of preparation and promotion on the part of the organizers. Crowdfunding companies take a fee, usually around 5 percent, of the total amount raised. Some take money directly out of donations.
What is a Crowdfunding Campaign?
When you want to crowdfund a project, the first step is to start a campaign. This can be done from your own website or other online or offline platform that you own or it can be done through a service such as GoFundMe, Kickstarter or one of the many others. There are a variety of rules for running campaigns and these vary from one platform to the next.
Different platforms are used for different purposes. Kickstarter, for example, only allows fundraising for projects it deems creative. GoFundMe, which is currently the largest crowdfunding platform, is more diverse and may be used for all types of purposes, including personal fundraising and raising money for businesses.
Is Crowdfunding Right For Your Business?
As popular as crowdfunding is, it’s not always the right solution for everyone. Before you start a campaign, you should first consider if crowdfunding is the right approach for you.
Are you prepared to promote your campaign? Setting up a crowdfunding campaign is only the first step. You will largely be responsible for getting traffic to your campaign site and doing a good job at explaining why people should invest in your business. If you don’t feel you have the time or expertise to do this, crowdfunding probably isn’t viable for you right now. Regardless of how you choose to raise money, it’s essential that you do plenty of research and preparation. You should also be skeptical of anyone who promises that funding your business will be easy or effortless.
The Top 5 Crowdfunding Platforms
Let’s take a look at some of the leading crowdfunding platforms for funding businesses.
Kickstarter
This is one of the best and oldest crowdfunding sites, having started in 2009, and still one of the largest. Kickstarter’s mission statement is “Our mission is to help bring creative projects to life.” Because of the focus on creative projects, this isn’t the appropriate platform for everyone. If you aren’t sure if your business fits their criteria, you should check their list of categories, which include art, design, fashion, photography, music and technology. The category “technology,” of course, allows many businesses to fit.
Kickstarter has a manual review process, so there’s no guarantee that any particular project will be approved. On the other hand, this gives the platform a certain credibility for those campaigns that are approved. Kickstarter has a 5 percent fee for all campaigns. Campaigns must be run using Amazon payments, which charges additional fees. Projects must meet their goal to be funded. In other words, if your target goal is $10,000 and your campaign only raises $5,000, you get nothing.Indiegogo
Indiegogo
Indiegogo is another very popular crowdfunding company that also launched in 2009. It’s much more lenient than Kickstarter when it comes to accepting projects. The review process is automated, which means that most projects are approved. The downside to this is that there’s less quality control than Kickstarter, which may make investors more skeptical.
Some advantages of Indiegogo include flexible payment options for investors, including PayPal and credit cards. Indiegogo offers two options for campaigns -Flexible and Fixed. Flexible means you keep any funds raised, even if you don’t meet your goal. Fixed means you must meet your goal. The fee for Flexible campaigns is 9 percent; for Fixed campaigns it’s 4 percent.
GoFundMe
GoFundMe has become the third major player in the crowdfunding world. It’s also the most diverse, with many campaigns started for purely personal reasons. Like Indiegogo, it has flexible funding where you can keep whatever funds you raise, even if you don’t meet your goal. And unlike Indiegogo, you won’t be charged a higher fee if you don’t meet your goal. GoFundMe charges a 5 percent fee from every donation. Although GoFundMe is perhaps best known for personal and creative campaigns, it actively encourages businesses and entrepreneurs to create campaigns.
Patreon
The name Patreon is based on the word “patron.” As this suggests, the site was created for the purpose of finding patrons -people who regularly send money to fund your activities. For this reason, the site is not the best choice for a startup that needs a large amount of cash right away. On the other hand, it can be useful if you want to find long-term investors who are willing to stick with you for a while.
Another unique feature of Patreon is that you aren’t allowed to charge the public for products or services that have been funded by patreons. The idea is that you are getting paid by your investors so you can supply your products for free. On the surface, this might make Patreon an unlikely choice for businesses who are thinking about selling their products. It can, however, be a good vehicle for individuals and businesses who want to build a following and receive guaranteed funding. There’s also the fact that you can charge for projects that are not directly funded by Patreon. So, it’s possible to build a following on this platform that can help you make sales elsewhere.
AngelList
AngelList is a crowdfunding site that is specifically geared for technology startups. Some of the companies that have used AngelList to raise money include Uber, Thumbtack and Postmates. This is one of the more exclusive crowdfunding services. You must submit a private application and fewer than 2 percent of applications are accepted. For anyone with a good business plan who is looking to connect with big investors, it can be worth applying to AngelList. Because of its exclusivity, however, it’s important to be well prepared before you apply.
Running a Successful Crowdfunding Campaign
When it comes to the question of how to run a successful crowdfunding campaign, there are many factors to consider. First of all, you have to decide if crowdfunding is indeed the best choice for raising money for your endeavor. Then you have to choose the platform that will work best for your campaign. Finally, you must have a viable crowdfunding campaign strategy and put in plenty of effort at promoting your campaign. If you take these steps, crowdfunding can be an effective way to fund your business.
from Darlene Milligan http://ift.tt/1SDIfhT via transformational marketing
from Tumblr http://ift.tt/1W2Hgxg
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