Ultimate Learning Guide To Successful Crowdfunding
Funding sources for business startups vary greatly in this modern era, ranging from traditional ones to the more contemporary ones. One popular example of the latter is Crowdfunding. Not only is this funding channel used by business startups, but charities, social enterprises and average people also make use of this method to raise funds.
What exactly is Crowdfunding?
As the name suggests, a ‘crowd’ is involved in ‘funding’ a particular crowdfunding venture or project. All of this takes place over the Internet on one of the many crowdfunding platforms that exist today. The crowd can include several hundreds or even thousands of individuals, organizations or businesses who are willing to make a contribution in the form of a donation, investment or loan to the crowdfunding cause. Funds extended by a ‘crowd’ result in a boosted cash flow which then helps these ventures or projects in getting started.
Several different types of crowdfunding exist and each serves its own purpose for the fundraiser. The type is chosen while keeping the needs and theme of the crowdfunding project in mind. Four of the main types of crowdfunding used today are:
Your contribution to the cause or the project is rewarded with some incentive related to it. These rewards can be monetary or non-monetary.
Your money is received by an individual, a social enterprise or a charity in the form of donations. More often than not, no return is promised as you ‘donate’ to the crowdfunding project.
Your contributions are basically investments in the project/business. By investing in it, you become a stakeholder and receive returns later usually in the form of the company’s shares.
You basically lend your money to firms or individuals and are promised an interest payment in return. This type is also known as peer-to-business (P2B) or peer-to-peer (P2P) lending.
Note: Out of these four types, only loan and investment-based crowdfunding are regulated by FCA (Financial Conduct Authority).
What are the main principles of Crowdfunding & how does it work?
What actually happens is that the companies or individuals who require funds create their pages on crowdfunding platforms and reach you through them. When you’re visiting one of these platforms, you can easily scroll through all the projects that are being pitched at that time. Overviews of all projects are available and if any of these pique your interest, you can look into them in more detail. This detail must include the following information from the individual, company or organization that’s raising funds:
– The crowdfunding goal
– The purpose of the ‘fundraiser’
– The potential rewards in-store for you
– The time-frame set for raising money
– The amount collected so far
– The number of backers (participants) who have contributed so far
After you, as an interested participant, have decided on the project you wish to pitch in, you can easily do so with a few clicks. Hence, such campaigns work quite simply from the viewpoint of a potential backer.
Note: There are a few risks associated to investment-based funding that participants need to be wary of, though. Therefore, as an investor expecting returns from the project, you should carry out a background check on the platform you are using to make sure it’s authorized. Moreover, don’t go overboard when investing; only invest about 10% of the money you have.
When looked at from the viewpoint of the company/individual who has started their campaign, the task of running and concluding a successful campaign isn’t really that easy. Of course, this method of raising funds has many benefits over traditional ones, but what’s key here for companies/individuals looking for funds is the commitment & responsibility shown, the effort & time invested in developing and polishing the campaign and the way they present themselves to you.
Firstly, you need to pick out a suitable crowdfunding platform for your campaign to increase chances of success and aid smooth operations. Different platforms have their own rules and regulations, for example, Kickstarter prohibits exhibiting projects or ideas that involve energy drinks or foods. Moreover, on some platforms, it is a MUST for the total goal to be reached in order for the crowd-fundraiser to have access to the amount collected. This is why you need to ensure that your crowdfunding project’s vision and theme aligns with your chosen platform’s criterion.
Secondly, there are certain challenges that the people behind the crowd-funding fundraiser need to overcome to generate widespread support and awareness about their project. It takes convincing & genuine founders, quality products, promising business plans, and smart marketing efforts to raise the total goal. Some prominent challenges faced, particularly when managing rewards-based crowdfunding campaigns, are as follows:
– Developing a cost-effective marketing plan & strategy throughout the campaigning period.
– Crafting a campaign’s message and description carefully in order to attract as many participants as possible to contribute to your purpose.
– Creating a high-quality, impactful video to advocate the campaign’s purpose and goals (the biggest challenge here will be the financial constraints).
– Developing a rewards program strategically in order to ‘maximize’ ROI.
– Opting for the most cost-efficient and cost-effective method for the fulfillment of rewards.
Lastly, the people/person behind the crowdfunding campaign need to be able to encounter any obstacles that come their way effectively. In addition to the five challenges mentioned above, every crowdfunding project can face many others. A positive mindset and a genuine, effort-driven marketing approach are key in running and concluding a successful campaign!
Some examples of effective and successful crowdfunding fundraising campaigns
Taking a look at these can be useful and motivating for both the backers and the people looking to raise funds because their success really shows how crowdfunding cannot be undermined as a source of finance.
RadioPublic: raised $150,000 from their passionate listeners and users.
Gimlet Media: raised $200,000 and have now been acquired by a leading company; Spotify.
Ample Foods: raised more than $370,000 during their infamous Indiegogo campaign.
It is worth mentioning here again that all crowdfunding platforms are not specifically designed to accommodate businesses and companies. Anyone can come forward, approach interested backers and raise funds to support their cause. A huge example of this is the way an amount of $700,000 was raised by a man to fund a bus-driver’s vacation. Moreover, an increasing number of people around the world are making use of these platforms to raise donations for the needy in times of crisis. Even many students today are raising funds to support their education!
About This Crowdfunding Guide
This guide offers the most insightful articles, educational videos, expert insights, specialist tips and best free tutorials about crowdfunding from around the internet. The learning guide is split into four levels: introduction, basics, advanced and expert. You can learn at your own pace. Each item shows an estimated reading or watching time, allowing you to easily plan when you want to read or watch each item. Below you’ll find a table of contents that enables you to easily find a specific topic you might be interested in.
What Is Crowdfunding?
Crowdfunding is when businesses, organizations or individuals fund a project or venture with small donations from many people. Put simply, a “crowd” funds a project or business, rather than one or two major investors. By receiving the necessary boost to cash flow, these ventures can get off the ground or launch new projects. Most of these campaigns happen via internet platforms, have set timeframes for when money can be raised and disclose specific monetary goals.
Crowdfunding vs. Crowdsourcing
Crowdfunding is the process of sourcing money or funds from a group or groups of people.
Crowdsourcing is the process of sourcing information or skills or end products from a group or groups of people.
The Pros and Cons of Crowdfunding
Crowdfunding is becoming an increasingly popular way for startup businesses and more mature firms to raise money. It seems easy: just sign up with a high-quality crowdfunding platform, list your funding needs, click a few buttons and poof! You’ve raised money. Of course, raising money for your business via crowdfunding isn’t that easy. Like any marketing or fundraising campaign, it requires a sound strategy and solid execution.
The Different Types of Crowdfunding
This is an important question because the four different types of crowdfunding all get lumped under this umbrella term of crowdfunding, but they’re actually very different.
This is also an important question because the rest of this series focuses almost completely on one of those types of crowdfunding.
Depending on where you look online, you’ll see different answers and sometimes different terms, but the way I break it down, there are four distinct types of crowdfunding.
The History of Crowdfunding
How long has crowdfunding been around? While some people claim that crowdfunding can be traced back to the 1700’s, others cite a campaign by Joseph Pulitzer as the first crowdfunding campaign. When the U.S. found itself unable to raise enough money to pay for a base for the Statue of Liberty in 1885, Pulitzer used his newspaper The New York World to raise money to cover the cost from more than 160,000 donors in just five months.
Beginner's Guide to Crowdfunding
Very few people could start a business, publish a book, release a record, or broadcast their opinion without someone else’s financial backing.
Unless you had a particularly wealthy and supportive relative, you’d have to try your luck at the bank or in countless soul-crushing meetings with investors.
And even then, you’d lose large portions of equity or be crippled by high-interest rates. Thankfully, today there’s another way.
In this article, you’ll learn why crowdfunding is so powerful, and 5 essential tips on creating a successful campaign. Plus, you’ll get a rundown on some of the most popular reward-based crowdfunding sites to fund your next venture.
The Crowdfunding Process
Planning and organizing an effective crowdfunding campaign is crucial to the timely and successful launch of a startup business.
While each campaign step is just as crucial and beneficial to success, it’s also important to think about launching the business itself, in conjunction with the crowdfunding campaign. In fact, following the steps to launch a crowdfunding campaign can also help plan and organize the fulfillment process of a new business or startup.
Overview of Crowdfunding Platforms
Keep in mind that these platforms are not in the business of giving away their services. They take a cut of your donations, and some even require setup or promotional fees. I found fees as little as 2.5 percent of each donation to as much as 15 percent of your total take. It depends on the service and what you’re hoping to do, so do your research before you commit.
The Future of Crowdfunding
Crowdfunding today exists in many forms. Platforms such as Kickstarter and Indiegogo let entrepreneurs reward their community of supporters with tiered, tangible rewards. Patronage-based models allow content creators to sustain their work with recurring donations from their fanbase. Equity crowdfunding and emerging initial coin offering (ICO) platforms tie ROI incentives to the funding process through the issuance of securities.
The Different Business Models of Crowdfunding
Crowdfunding is the practice of financing a project or venture by raising small amounts of money from a lot of people. It allows innovators, entrepreneurs and business owners to utilize their social networks to raise capital and the byword has come to encompass many types of crowdfunding which can include; donations, rewards, debt and equity.
How to Use Crowdfunding for Small Business
Got a great idea that will grow your business? Just need a cash injection to get there?
You have several options. You can ping your family and friends—surely someone’s got a little cash lying around to invest in your business. But let’s say you’ve already done that. Next? Maybe a small business loan? But the bank isn’t interested. Same with the Angel Investors you’ve approached.
You’ve got credit cards—but you’re still paying them off from that time you maxed them out to cover payroll.
Have you tried crowdfunding? Ninety-nine percent of businesses haven’t, but that’s about to change.
Reasons To Avoid Crowdfunding In Business
The premise is simple: set a fundraising goal (e.g., $500,000), and then try to get investors to pour money into it. If your goal is met by a certain date, you get the proceeds, but if the goal is not met, you get nothing.
But crowdfunding is not without its drawbacks. Here are 7 good reasons why crowdfunding may not be right for your business.
Crowdfunding for Nonprofit Organizations
Crowdfunding can be a daunting area for nonprofits. It can be used to supplement traditional fundraising campaigns such as GivingTuesday and if done well can be a major source of revenue to start new projects and endeavors. WOD for Water used crowdfunding to raise over $157,000 to bring clean water to over 800 million people without access to clean drinking water. There are so many different options, how do you know which one is right for your organization?
Crowdfunding in Politics
“It’s disrupting the old way in which politics was financed, which tended to be big donors with a certain agenda that didn’t necessarily reflect the will of the public at large,” explains Paul Hilder who, along with David Cameron’s former senior advisor Steve Hilton, founded Crowdpac in 2014. It launched in the UK in April 2016, just before the EU referendum, and Hilder describes the kind of crowdfunding his site can deliver as “kryptonite for big donors”.
Social Media Tips For Crowdfunding Campaigns
What people don’t realize is that you need a solid foundation to run a crowdfunding campaign. This foundation can be achieved in several ways. One of the most important is your ability to get noticed on social media sites. It’s highly important that you leverage the power of social media to your advantage. This article will help you build a formidable social media presence for your crowdfunding campaign.
Social Media Strategy for Crowdfunding Campaigns
One of the most popular ways for nonprofits to raise money these days is through crowdfunding. With these social fundraising campaigns, organizations like yours can tap into the giving power of your supporters’ personal networks and spread your campaign far and wide over the internet. In a crowdfunding campaign, nonprofits launch short-term fundraisers and call on many supporters to donate small amounts so they can quickly reach their goal.
Keys To Crowdfunding Success For Social Entrepreneurs
Crowdfunding means different things to different people, but it almost always means raising money from the public. For social entrepreneurs, it is all about changing the world.
There are lots of ways to change the world but only three relevant ways to crowdfund.
Strategies to a Successful Crowdfunding Campaign
Projects funded via crowdfunding platforms are also wide-ranging. People have gotten the funding they needed for causes ranging from paying for funeral expenses to school trips or medical expenses. And of course, startups have been a primary focus.
If you want your crowdfunding campaign to avoid a similar fate, these 12 keys can help you establish and market your new personal project or business venture.
Building a Crowdfunding Marketing Strategy
We’ll get to those great crowdfunding marketing tips in a minute but it’s important that you set the stage for successful marketing before you even hit start on your campaign. Checking some of the boxes below on your crowd campaign will make sure you’re reaching the right people and spending your marketing time effectively.
First, you need to define exactly who it is you want to reach with your marketing strategy.
Step By Step Guide to Launch a Crowdfunding Marketing Campaign
Crowdfunding is a marketing strategy for raising money from a huge number of people who can contribute a small amount to your business or project. In return, you need to offer them some benefits. In the past few years, crowdfunding has gained immense popularity. If you can successfully convince large masses of people to contribute a small amount, you will be able to generate required capital within a short time without much hassle.
Raising Capital as a First Time Founder
In the past year we’ve raised over a million dollars in funding, netted some revenue, faced over a hundred rejections, and also had the opportunity to work with some of the greatest investors on Earth. It’s a brutally emotional, physical and mental roller coaster when you’re fundraising but it sure is exhilarating.
If you are a first-time founder feeling lost about raising capital — or you’ve got a big idea and don’t know where to start — here are some of the lessons we’ve learned through both experience and mentorship.
Why Crowdfunding Campaigns Fail
Although a lot of time, effort and money goes into a project, it doesn’t always return expected results. Often, the reason for the failure of a crowdfunding project is a disastrous campaign.
After analyzing a whole host of successful and failed crowdfunding projects, we are able to classify broadly the grounds for failure of a campaign.
Equity Crowdfunding Pros And Cons
How should founders weigh raising venture capital against equity crowdfunding?
We compare the pros and cons of equity crowdfunding with the classic approach of raising from VCs or angels to help you pick the one best suited for your company.
Crowdfunding Legal Issues and How to Avoid Mistakes
Crowdfunding has helped bring the power of the Internet to investing. Since the launch of sites like Kickstarter in 2009, major startups producing market-disrupting technology like the Oculus Rift have gotten their start by amassing small donations from a very large group of people. Here’s a look at what crowdfunding is and crowdfunding legal mistakes to avoid.
SEC Regulation Crowdfunding
Regulation Crowdfunding enables eligible companies to offer and sell securities through crowdfunding. The rules:
— Require all transactions under Regulation Crowdfunding to take place online through an SEC-registered intermediary, either a broker-dealer or a funding portal
— Permit a company to raise a maximum aggregate amount of $1,070,000 through crowdfunding offerings in a 12-month period
limit the amount individual investors can invest across all crowdfunding offerings in a 12-month period
— Require disclosure of information in filings with the Commission and to investors and the intermediary facilitating the offering
How to Create an Effective Crowdfunding Video
A lot of hard work, preparation, and high-level execution go into pulling off a successful campaign. To ensure success, you need to collect an audience of potential customers ahead of time through a pre-awareness email capture campaign, use top-notch graphic design to visually represent and demonstrate your vision for your project, and, last but not least, create an excellent pitch video to sell your audience on why they need whatever it is you’ve dreamt up.
Tips for a Successful Crowdfunding Campaign
Watch Alon Goren get all worked up while giving his 5 tips for a successful crowdfunding campaign in this 7-minute video.
KPIs: How to Define and Measure Crowdfunding Success
As you’re planning for a crowdfunding campaign, it’s important to know what to expect. A big part of setting expectations for yourself and your team is knowing what crowdfunding success metrics are important and how they should be defined. If you have a good idea of what success metrics should look like, it’s much easier to evaluate your crowdfunding campaign and course-correct where needed so that you achieve the highest levels of success.
Crowdfunding Marketing Agencies & Consultancies
I’ve assembled a comprehensive list of the top crowdfunding marketing companies. These companies will help with marketing, promoting, and getting attention to your crowdfunding campaign.
Before you know it, you’ll see a surge in backers, traffic, and funding!
Now… just because you have access to a big advertising budget and the experience of seasoned marketers doesn’t mean you’re guaranteed success
Successful Crowdfunding Case Studies
What was it that made it so successful and how can you replicate this for yourself? That’s what I want to discuss right here and so I’ve aimed to make this post is your mini-guide to creating a kick-ass crowdfunding campaign so you can turn that dream into a reality.
Most Successful Crowdfunding Campaigns
This chart contains information about the most funded crowdfunding campaigns on Kickstarter and Indiegogo– the two most popular reward-based crowdfunding sites. We compiled most of the data directly from their websites.
The list is not totally comprehensive: the idea is to give you a general view of which crowdfunding projects were the most funded overall and also within each category. There are currently over 900 campaigns included in the chart.
Characteristics Of Successful Crowdfunding Campaigns
While the newness of crowdfunding may have worn off, this popular way to raise funds has continued to spark interest, especially to entrepreneurs and startups. For some, it is a panacea; a way to raise funds quickly and easily, with an extra dose of marketing and awareness thrown in. Sadly, the reality of what is needed to make a crowdfunding campaign a success is often missing in all the excitement.
Further Reading: Best Crowdfunding Books
Equity Crowdfunding: The Complete Guide For Startups And Growing Companies. Equity crowdfunding offers amazing potential for startups and growing companies, but it is also a very steep learning curve. Many companies begin with no real idea of how to choose a platform, how to craft their pitch, or what they should be doing to drive people to their offer page and invest. The author, Nathan Rose, comes from an investment banking background, advising companies on initial public offerings. Now, he brings the same practical experience to new business, small business, and startups.
Six Figure Crowdfunding: The No Bullsh*t Guide to Running a Life-Changing Campaign. In this bold, irreverent, hilarious how-to guide, bestselling Kickstarter campaign manager Derek Miller takes his millions of dollars of Super Crowdfunding experience and delivers everything you need to know about being a modern entrepreneur in today’s global marketplace.
Your First Kickstarter Campaign: Step by Step Guide to Launching a Successful Crowdfunding Project. You will learn how to prepare for your first crowdfunding campaign and do pre-launch with a minimal budget by using personal efforts and delegating some work to others. This book is for Kickstarter newbies and first-time creators. It will teach and show you how to collect potential backers early, in advance, and how to plan a Kickstarter campaign from start to finish with the aim of ensuring that you get fully funded.
Crowdfunding Basics In 30 Minutes: How to use Kickstarter, Indiegogo, and other crowdfunding platforms to support your entrepreneurial and creative dreams. In a single sitting, you will learn about the different types of crowdfunding projects that are possible, including entrepreneurial startups (Kickstarter and Indiegogo), creative or artistic projects (Kickstarter, Indiegogo, and other platforms), charities and community causes (GlobalGiving), individual support campaigns (GoFundMe), and patronage funding (Patreon).
Further Learning: Best Crowdfunding Courses
The Complete Crowdfunding Course for Kickstarter & Indiegogo. In July 2016, we embarked on a 28-day crowdfunding campaign on Kickstarter to raise money for our online learning platform for entrepreneurs. In just 28 days, we raised over $75,000 from 1000+ backers in return for ZERO equity. We want to share with you how we did it and distill 3 months of research into one evening so you can successfully crowdfund your idea.
Crowdfunding Campaign for individuals & small organizations. This practical and concise course provides comprehensive guidance for nonprofit fundraising around the globe. With tips and tools, expert advice, and real-world insights, this robust resource addresses the entire spectrum of fundraising for nonprofits.
Lending, Crowdfunding, and Modern Investing. In this course, you’ll learn the foundational theories behind robo-advising, crowdfunding, and marketplace lending, and how to apply these theories to optimize your investments. You’ll learn how to apply the ideas behind robo-advising and crowdfunding to better assess and leverage a more optimized portfolio while managing risks.
Crowdfunding by The University of Pennsylvania. This course will reveal the science behind successful crowdfunding, drawing on data from hundreds of thousands of campaigns. You’ll learn different types of crowdfunding approaches, and receive detailed advice on what to do (and what not to do) when crowdfunding.