In the last article, we discussed different ways to raise capital for your new business venture. Here we’ll focus on one method specifically, the one which has the potential to bring you huge capital (as much as $134,801) and help reach the largest number of people possible (talk about having a marketing head-start). This method is of course, Crowdfunding.
Crowdfunding flips the traditional idea of asking a small number people for large amounts of money on it’s head, to asking a large number of people for small amounts of money.
It’s become a massive market and is continually growing at a huge rate. The global amount raised through crowdfunding more than doubled from $16.2B in 2014 to $34.4B in 2015. In 2017 it looks set to overtake Venture Capitalists as the largest source of funding for startups.
There’s much funding to be had, here are our 7 top tips to raise thousands of dollars for your startup.
1. Choose Your Platform Wisely
To successfully begin crowdfunding you’ll need to carefully pick the platform best suited to your business idea.
Indiegogo is a brilliant general platform where you can fund pretty much any type of venture, Kickstarter is probably the most famous crowdfunding site and is more focused on creative industries. GoFundMe is based more in personal projects, Crowdrise is based more in charitable ventures, and Giggrabbers lets you crowdfund specifically for business development purposes. Here’s a list of 10 Crowdfunding sites to get you started.
It’s important to choose the correct platform which best reflects the venture you’re starting in order to maximise your chances of receiving the total funding you need.
2. Choose to give Rewards or Equity
When choosing a platform, it’s important to decide whether you want to reward people for contributing or whether you want to exchange equity for contributions.
Rewards are by far the more popular option – contributors will get something for the money they pledge and you get capital, marketing and brand awareness.
Giving out equity, that is, a share of your business in exchange for contributions is a route where you’ll have shareholders in your business – their share being proportional to how much money they’ve contributed.
Bear in mind giving out equity will lessen our own share in your business, but investors will generally be willing to contribute more if they’ll receive equity in return, rather than rewards.
3. Select the Correct Target Market
Who is your innovative idea aimed at? What demographic or part of society would most benefit from what you’re offering?
Honestly and objectively answering these questions will allow you to discern who’s best suited to your product, and then specifically target them in your crowdfunding pitch.
Making sure you know who you’re targeting will ensure that you reach the people who care most about your idea, and therefore the people who’d be most likely to fund more money toward your idea.
The importance of this cannot be underestimated – market to the correct people and you’ll be halfway on your journey to raising hundreds of thousands of dollars.
4. Tell a Good Story
Tell your story. Why did you start this venture? What made you want to take action? Why do you require funding? What need are you trying to fulfill, which wasn’t easily fulfilled for yourself as a consumer? People don’t connect with faceless products or service features, they connect with emotions, needs, human faces and with stories to which they can relate.
Tell your story as vividly as you can, don’t be afraid to be honest because this is how you’ll best connect with people. Write your story in your crowdfunding pitch, or better yet, make a video about it. This will put a face to your business, your target market will have something human and relatable to connect with – You.
People are allured by stories and they’ll be much more willing to be part of something and give to something with which they can connect.
5. What’s in it for them?
As much as people love stories, they’ll be unlikely to give much unless they feel they’re getting something of value in return. This is a basic principle of human interaction – the rule of reciprocity.
This is where your decision about whether to give rewards or equity comes in. If you’ve gone down the route of exchanging rewards for funding, you’ll have to make sure your contributor will feel they’re getting their ‘money’s worth’ when they fund you.
This might sound a bit paradoxical at first; how are you supposed to give something of equal value when you’re trying to raise money in the first place? How can you spend money on things to give contributors when you’re looking for money from them?
Luckily, you don’t have to spend much. For small pledges you can perhaps offer mentioning the contributor to your social media followers, for medium sized one you can offer that plus some freebies connected to your venture. For larger ones you can offer all of the above plus first chance to sample, have or use your brand new product or service when it’s up and running.
If you’ve gone down the equity route, you’ll have to make sure that your investors are receiving a decent share for what they give, but also that you’re not giving away too much of your own equity.
Making sure your contributors get something valuable in return for funding you is massively important. If you take care of your contributors, they’ll take care of you and will be much more willing to provide the thousands that you need.
6. Pick the Right Budget and Pledge Amounts
How much will you actually need to successfully get your startup off the ground? How much to create the first batch of products? For R&D? Always take into account worst case scenarios and budget cushions.
Choosing the right total budget and the right individual pledge amount options is hugely important. Making sure your total budget is enough that you can bring your product to market, and that each individual pledge corresponds to how much value in reward you’re giving out is key.
Choosing these wisely will ensure your contributors will be more willing to give. If it’s obvious to them that they are getting more value in return for the amount they give, they will be far more willing to fund you.
Some platforms employ an all-or-nothing policy, that is, if you don’t manage to raise the entirety of your budget by the end of your crowdfunding campaign, you won’t be able to be keep any of it, whereas other platforms let you keep whatever you manage to raise.
Ensuring your budgets are correct will greatly help not only in raising funds, but making sure you’re raising enough.
7. Engage and Continue to Engage with Your Contributors
One thing you must do is engage with those who fund you. They will expect a return for what they’ve invested and will want to know progress. Generally, the more one gives, the greater invested they are.
In order to keep them as prospects and eventually have them not only as investors, but customers and referral marketers as well, you’ll have to stay engaged with them, even after you’ve secured your funding.
In the age of the internet, people are bombarded with attention grabbing tactics. People who fund you have a genuine interest in your business and they will want to hear from you.
Make sure you keep engaged and you never know how much they’ll help you in the future as well.
Implementing these strategies will make your crowdfunding campaign stronger and more compelling. Even if you fail to raise hundreds of thousands of dollars, you will absolutely generate more traffic, raise more money and run a successful campaign.
If you’re not leveraging at least three of the key features mentioned earlier to improve your campaign, we highly recommend that now is the best time to start.
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