Let’s start at the very beginning. What is crowdfunding?
Crowdfunding is when a business or a project is funded with small donations from many different people instead of one or two major investors. This can be a great option for those businesses that struggle to get a big formal investment.
There are four different types of crowdfunding: donation, rewards, equity and debt. Here’s a breakdown of each one:
|Donation-based crowdfunding is when people give money without expecting anything in return. They do it to support you, your business or your project.||This is when people get something in return. The bigger donation the bigger the reward. It’s usually merchandise or a discount to use your product or service.||Based on the size of the donation, the participants receive a proportion of a business in exchange.||The wors the same as a loan. You must repay the money invest with interest and by the set deadline.|
How to create a successful crowdfunding campaign
Many people assume that crowdfunding is a simple way to make money. But is there really such a thing as making money easily? Creating a successful crowdfunding campaign requires time and effort. Even if you have an amazing idea, success isn’t guaranteed. Potential backers usually don’t actively seek projects or businesses to invest in. That’s why you need to do everything you can to reach those potential investors and prove that your idea is better than anyone else’s.
Here are some tips that will help you increase your chances of reaching your crowdfunding goals:
Have a great product
Although we said that having a great idea isn’t enough, you can’t do much without one either!
Before starting your crowdfunding campaign, make sure people are actually interested in what you offer. Do market research, test your product or service with other people and ask for honest feedback. This will help you improve your idea and increase your chances of attracting more backers.
Set your investment goal
While receiving more money than you need to launch your business or new project can seem like a great way to make some profit, that’s not something you should be thinking about when launching your crowdfunding campaign. Instead, try to make your goal as low as possible.
If you set your target too high, you risk not reaching it. If you fail to reach the set amount, funds will likely be returned to the investors or you’ll have to pay additional fees to collect what you’ve raised.
Research crowdfunding platforms
Most crowdfunding campaigns are run online. There are a few platforms you can choose from including Kickstarter, GoFundMe, Crowdfunder or Fundable.
Before you choose one, make sure you do research. All platforms have their own rules and guidelines. If you breach them, your campaign is likely to end before it even starts. That’s why you need to read through those thoroughly and understand which platform works best for you and your monetary goals.
Market your crowdfunding campaign
You can’t just post your campaign on one of the crowdfunding platforms and forget about it. With crowdfunding getting more and more popular, it’s essential that you find ways to stand out from others.
Before launching your campaign, try to create a buzz around it. Use existing contacts, social media, networking events, send out press releases – make people as excited about your campaign as you are!
Even if you have a great start, things can change after the initial launch. Prepare strong marketing materials for every stage of your campaign, be active on both your personal and business social media accounts, create an emotional connection with your network and use every opportunity to reach your potential backers.
Create a promotional video
You spend hours writing a description of your new project just to realise it’s the length of a book. Let’s face it – no one loves reading hundreds of pages about why your project is worth investing in. You need to give a short but convincing answer. And the best way to do so is by creating a video.
If done right, a video lets you demonstrate the benefits of your product or service as well as brings some personality to your brand. So don’t just stand in front of the camera talking about how amazing your new idea is. Use your creativity to create something engaging and relatable. Something that would make people want to invest themselves AND ask others to invest as well! And don’t forget to explain WHY you need that exact amount of money to carry out the project.
Communicate with your backers
These are the people that support you and your idea – at least you can do is communicate clearly and effectively with them. Update them throughout the process to build trust. Don’t be afraid to be transparent. If you experience some delays with launching your new product or service, or something goes wrong, don’t try to find excuses. Let them know what is happening and how you’re trying to solve those problems!
Once the campaign has finished, keep your backers in the loop and maintain good relationships with them.
Make rewards worth investing
If you choose reward-based crowdfunding, make sure your rewards are creative. Something like a 10% discount on their first orders works great to attract new customers but not investors. Think about what you can give in return to show your appreciation while keeping your costs as low as possible. Also, consider different rewards for different levels of investment. This will encourage potential backers to invest a bigger amount.