Crowdsourcing has grown into an excellent way for entrepreneurs and early-stage companies to validate their business, find capital and early adopters, and get the exposure they need to grow.
Today we have listed down an “All you Need to Know about crowdfunding your Startup”.
What Is Crowdfunding?
Crowdfunding is the practice of funding a project or enterprise by collecting small amounts of money from numerous people, typically via online platforms. In the past two decades the market of crowdfunding has been growing quickly; crowdfunding has become a new way to finance, for example, start-up companies, projects in the visual arts and music, technological innovation, scientific research, and community projects.
Related Blog: What is Crowdfunding: All You Need To Know
What is Crowdfunding for Startups
Starting a business may be an exciting process, but it costs money. When determining business startup costs, it’s important to be realistic. Things like office space, legal fees, payroll, business credit cards and other organizational expenses can really add up.
Online crowdfunding — raising smaller amounts of money from multiple backers — has become an increasingly common solution to this dilemma because it allows startups to reach out to a large number of potential investors at once.
Crowdfunding for Startups in India
Obtaining financing is one of the biggest hurdles most entrepreneurs will have to overcome. If a bank loan won’t cover what you need and you don’t have any connections to investors, it can be tough to know where to begin. Online crowdfunding — raising smaller amounts of money from multiple backers — has become an increasingly common solution to this dilemma because it allows startups to reach out to a large number of potential investors at once.
Although Kickstarter and Indiegogo are two of the most popular crowdfunding platforms, success there isn’t always guaranteed: For every project that meets its goal, there are dozens that just didn’t pick up enough steam to get funded. So, where else can you turn?
Whether you’re looking for a small investment to jump-start your company or a large round of capital to grow it to the next stage, here are few things that can help you raise the money you need.
Types Of Crowdfunding For Startups
While there are four types of crowdfunding for startups, each receives money from interested donors. Here’s a breakdown of each one:
1. Donation:
Donation-based crowdfunding is when people give a campaign, company or person money for nothing in return. Let’s say you create a crowdfunding campaign to purchase new equipment for your company. The individuals who give you money do it out of support for the growth of your business and nothing else.
2. Debt:
Debt-based donations are peer-to-peer (P2P) lending, which is a form of crowdfunding. In debt-based donations, the money pledged by backers is a loan and must be repaid with interest by a certain deadline.
3. Rewards:
This is when donors receive something in return for their donations. The rewards vary by the size of the donation, which incentivizes higher contributions. Based on how much money participants give to a campaign, they may receive a T-shirt, the product or service – often at a discounted rate.
4. Equity:
While some crowdfunding campaigns don’t allow backers to own a portion of the company they’re supporting, equity-based crowdfunding allows small businesses and startups to give away a portion of their business in exchange for funding. These donations are a type of investment, where participants receive shares in the business based on how much money they contribute.
How To Choose Right Kind Of Crowdfunding Platform For Your Startups?
Doing a fair amount of online research on each. You should look at similar campaigns done by each platform in the past and how they performed. This includes number of investors (the more the merrier), amount raised, press coverage and success of the company raising finance following their campaign. Why does the latter matter? Simply because you want to be seen with the best.
It is also worth following each platform for as long as you can. Take note of how the live campaigns are performing, how much they raise per day, how many investors and the overall amount being invested through the platform per day. This gives you a very good idea about the so-called liquidity on each platform. This is important and an eye-opener. You want to be where the money is.
There are a number of things to consider when choosing a crowdfunding platform, including:
- Type of investors – individual, business and institutional investors can all pledge money to a project, but some platforms stick to having one specific type of investor.
- Fees – different platforms have different structures to price their services. These might include arrangement fees, administration fees, legal fees, success fees, transaction fees, commission fees etc.
- Type of platform – some platforms are purely a page that brings businesses and investors together. Others have a more active role such as one to one support and advice with your campaign.
- Platform format and design – each website offers its own model, layout and pledge process, which attracts certain types of investors. Knowing what’s important to potential investors and which platforms they like will help determine which is most likely to lead to the funding target being reached.
- Security – will investors feel secure giving money to the website? You must ensure that the platform you choose to use is secure and follows all legal requirements when handling online funding transactions.
- General v niche site – different platforms focus on different types of project. There are even platforms specifically for certain types of projects, from charities to technological products.
Benefits Of Crowdfunding For Startups
If you are considering raising finance for your business, project or venture through crowdfunding, there are a number of factors that you might want to consider.
Here are a few benefits of crowdfunding for startups:
- it can be a fast way to raise finance with no upfront fees
- pitching a project or business through the online platform can be a valuable form of marketing and result in media attention
- sharing your idea, you can often get feedback and expert guidance on how to improve it
- it is a good way to test the public’s reaction to your product/idea – if people are keen to invest it is a good sign that the your idea could work well in the market
- investors can track your progress – this may help you to promote your brand through their networks
- ideas that may not appeal to conventional investors can often get financed more easily
- your investors can often become your most loyal customers through the financing process
- it’s an alternative finance option if you have struggled to get bank loans or traditional funding
Read Further: Top 12 Benefits of Crowdfunding for Startups in India
How To Crowdfund Your Startup?
The digital era has made raising funds for your business idea, nonprofit cause, or personal needs easier with the use of online crowdfunding platforms. To date, people have raised more than $34 billion worldwide using these platforms, with easy-to-use tools that provide a smooth experience for both fundraisers and their supporters.1 Whatever your reason for raising money, there is a crowdfunding site for you.
To help you get started, we researched and reviewed the top crowdfunding platforms. We selected the top six based on their ease of use, history of generating fundraising success for their customers, pricing options, social media integrations, and more. Whether you are an entrepreneur, an artist, or a climate change advocate, these platforms will help you get the funds you need for your project, idea, or cause.
How Does Crowdfunding Help Startup Businesses?
Crowdfunding Helps to Brainstorm Ideas
One of the biggest challenges for small businesses and entrepreneurs is to be able to cover all the holes that a venture might have at an early stage. By having a crowdfunding campaign, the entrepreneur has the ability to engage the crowd and receive comments, feedback, and ideas.
Crowdfunding Introduces Prospective Loyal Customers
People who view the entrepreneur’s campaign and decide to contribute are ones that believe in the success of the company in the long run. In essence, these people are early adopters. Early adopters are very important to every business, as they will help spread the initial word without asking for anything in return. Such people care about the venture’s brand and message and are likely to be loyal customers throughout their life.
Can I Crowdfund My Startup?
Yes.
Crowdfunding your business is a great funding option for entrepreneurs who are facing challenges funding and raising capital for their startups. Building a good crowdfunding campaign has other “side” advantages such as marketing your startup, and improving your SEO in the long run.
Crowdfunding your business helps in promoting your business idea and products to a wider range of customers which results in increasing brand awareness and online investment opportunities.
Starting a crowdfunding campaign will also help you approach and connect with angel investors nearby or globally.
Best Crowdfunding Platform For Startups In India
To help you get started, we researched and reviewed the top crowdfunding platforms. We selected the top six based on their ease of use, history of generating fundraising success for their customers, pricing options, social media integrations, and more. Whether you are an entrepreneur, an artist, or a climate change advocate, these platforms will help you get the funds you need for your project, idea, or cause.
Top 8 Crowdfunding Sites In India For Startups To Raise Funds:
- Kickstarter
- Wishberry
- Indiegogo
- FuelADream
- Fundable
- Seed and Spark
- Catapooolt
- Kiva.org
Read Further: Top 10 Crowdfunding Sites In India For Startups To Raise Funds
Summary
Crowdfunding is a good option for new startups with people and investors getting aware of it. It is a platform to show your product to investors if you do not have many contacts in the business world. The main advantage of crowdfunding is that you do not necessarily have to lose equity while raising funds. However, the Indian crowdfunding system does work in that way a lot.
There might be some people who will fund you without equity but you will get the majority of the funds from professional investors who will demand equity in your company. It’s your job to choose the right crowdfunding option.
Crowdfund Your Startup With Social For Action
If you want to obtain crowdfunding for your business, it’s essential that you’re prepared for the campaign. If you properly understand your audience and the product or idea that you’re crowdfunding for, you should be able to create an effective campaign. Keep in mind that extensive market is very important before you start crowdfunding. The product or idea that you’re raising money for should be somewhat known when the campaign begins. Go to this link to learn more about what it takes to prepare for a crowdfunding campaign.
The platform that you choose should also have some tips and resources that can help you make the most out of this process. Here at Social For Action, we can provide you with the help that you need in receiving the funding for your dream product.
Social For Action should be able to accommodate all of your needs as you attempt to grow your business.
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