How To Raise Money For Your Start-up With Crowdfunding
As an entrepreneur with an idea for a new product or service, one of the biggest problems you will face is raising funding to launch your start-up. In years gone by, you would take your idea and a prototype to your bank manager and ask for a loan. The manager would assess your idea and would often be able to make his own decision. If you required a large amount of funding, he may refer it to head office.
Today, there is a smarter way to raise money for your start-up
Today, there is a smarter way to raise money for your start-up and build a crowd of loyal customers in the process, and that way is… crowdfunding. Crowdfunding provides you with the perfect way to validate your start-up idea, raise funding and build a crowd of early adopters and Investors; and you don’t have to worry about paying any loans back to the bank.
‘Rewards’ & ‘Equity’ Crowdfunding
The two main areas of crowdfunding are ‘Rewards’ and ‘Equity’.
Rewards crowdfunding lets start-ups raise funding for a project by giving backers of the campaign a reward. Generally the start-up has designed a new innovative product, which they pre-sell at a discount. The start-up uses the money to manufacture the product and the backer waits for the product to be made and delivered. Kickstarter and Indiegogo are the main crowdfunding platforms to use when planning a ‘rewards’ campaign.
Equity crowdfunding allows start-ups to raise funding by releasing shares (equity) in the company for a fixed amount of investment. Investors who back a start-up are hoping the business does well increasing the value of their shares which they can sell at a later date. In the UK platforms such as Crowdcube and Seedrs are the places to run your equity crowdfunding campaign.
Not all crowdfunding projects are successful
It has to be said that not all crowdfunding projects are successful and a start-up will need to invest a reasonable amount of money into running their campaign. However, running a successful campaign can be the difference between launching your start-up and it never getting off the ground at all. So the investment is generally worth the risk if you believe you have a great product or service that people need.
How to increase your chances of success?
Successful rewards and equity campaigns follow a few common practices, which you can model:
- They have a strong and unique product/service offer
- Are presented in an appealing and engaging way – with a pitch video, creative copy and images
- Implement a marketing strategy to help build attention about the campaign and mobalise your crowd.
- Have a team in place to manage the campaign workload.
Planning and implementing a crowdfunding campaign takes time and can be a lot of hard work. To increase your chances of successfully funding your campaign you should research past campaigns and gain a good understanding of what is required to run a successful campaign. Speaking with other start-ups who have crowdfunded is a good idea and hiring a crowdfunding marketing agency such as Wow Your Crowd, will help guide you on your crowdfunding journey and improve your chances of launching your start-up and realising your business dreams.
To learn more about Crowdfunding and how you can kick-start your campaign contact us today.
