Crowd together: Crowdfunding for Startups
You have so many great ideas. Most of them never leave the drawing board. You just don’t have the money. Hang on, there’s a solution–crowdfunding. Crowdfunding is a modern solution to finance and launching new businesses. All you need is a campaign, a platform, and an idea to get started.
Now crowdfunding might seem like a daunting prospect to those unfamiliar with it. But it’s simple, really, all you have to do is convince crowds to fund your initiative through the internet.
It just takes four simple steps:
- Research
Before you get those funds in, you need to do your homework. You need to know your market, your audience, your funding needs, and your funding platforms. It is only then that you can devise a funding strategy or business plan.
- Select audience
You need to choose your audience. It makes everything more streamlined when you know your market and appeal to them directly. Your audience could be the target consumer of the product/service you want to sell. The audience can also be those sections of society that are more likely to fund the initiative. Say you are a startup for women’s rights. You will need to target people with specific genders, economic classes, and political orientations.
- Select platform
Now that you know who you need to target, you will need to select the right platform. It will need to be a platform that allows for your funding plan and reaches a wider audience. Do make sure that the platform is efficient, user-friendly, and operates in your area.
- Offer incentives
You can’t just ask people for money. You need to give them an incentive, a motivator. This could range from t-shirts or contests or social media shout-outs. Social media influencers often use this strategy to do crowdfunding marketing. This means that they use the funding opportunity to further their brand image. This stirs interest in the crowd and creates brand loyalty.
All this might seem a little complicated. Maybe you don’t want to risk depending on strangers for your dream. Maybe you would prefer traditional forms of capital funding, like loans. Maybe you’re not tech-savvy and want to stick to face-to-face options.
But that might be a mistake. Crowdfunding can raise your capital very fast. There are no added burdens of repaying loans and interests, which might weigh heavily on a new business. Crowdfunding platforms are also often user-friendly and don’t need much technical knowledge.
Besides, there are many other benefits to crowdfunding, like:
Increased reach
When you use a crowdfunding website, you will get access to many markets and many investment opportunities. You can raise capital from individual strangers and from professional investors as well. You can get the capital need quickly and efficiently. You also get to see how popular your business would be and see the true shape of your target market.
Organization
Even if you do not get funding, you can get a solid business plan out of the whole thing. You can then use business outline and funding proposals to send to potential investors on other media and channels. In any case, you will have a solid strategy for your business operations going forward. This can help tremendously with the organization in structure.
Awareness
Crowdfunding campaigns are a great way to get people talking about your product. It raises brand awareness and encourages traffic to your social media site and website. You can get potential customers and can even sell your first products.
That sounds pretty great, right?
So, how do you crowdfund? In one of three ways:
• Donation-based crowdfunding
This is a crowdfunding opportunity where investors will not need to be financially compensated. When you get contributions, they will simply be donations. This is an ideal strategy for new businesses that can’t be bogged down with repayment schedules.
• Rewards-based crowdfunding
This is another crowdfunding technique that already established brands, individuals and businesses can use. As the name suggests, you will need to reward your contributors in some way. Campaigns often pre-sell their new product for a discount and deliver the product a few months later to the backer.
• Equity-Based Crowdfunding
This is different from the other two techniques. This will effectively make your investors or contributors have stakes in your company. They will trade capital for equity shares and become part-owners. They will then need to be compensated financially as a return on investment much like the traditional dividend.
