What is Crowdfunding?

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CrowdfundingUsing Crowdfunding to Raise Capital

More companies are looking to crowdfunding for initial start-up capital or additional cash for expansion, some with great results and others having difficulty.    What makes some campaigns a success and others a failure?

Select the right type of crowdfunding for your business.  There are so many different types of crowdfunding platforms out there, it is important to select the right type.

 a) Rewards Based Crowdfunding

This is divided into two types, “All-or-Nothing” (AON)  or  “Keep-it-All” (KIA).     Kickstarter is an example of AON in which the campaigner has to raise the capital target set or receives nothing.  In the case of AON, the campaigner gets to keep the funds only when the target is reached.   The Indiegogo platform funds KIA campaigns.   In a KIA campaign, the recipients get to keep all the money raised (minus an administration fee)   In return for investing, the crowd receives some type of reward.   This could be an early copy of the new product, a related product, or a combination of items.  Crowdfunding has become so popular there are platforms specifically related to local communities.  Rewards based crowdfunding platforms such as Moola Hoop and Plum Alley are solely focused on women led companies.

b) Equity-based crowdfunding

In this scenario the crowd provides the financing for a company.     Not all countries allow equity-based crowdfunding, so it is important to see if your country allows this.     In most cases, there are limits to the amount of investment an individual can make in a Company.   A large crowd provides small amounts of money.   These types of campaigns are available only for private companies.

c)  Credit-based Crowdfunding

This type of investment gained popularity through sites such as the Lending Club and Prosper.   A prospective borrower submits the terms of the “ask” and are matched with a pool of investors who are willing to accept the credit terms.  In developing countries, there is also the micro-lending site, Kiva.

d)  Donation Based Crowdfunding

This is most often used for personal causes, such as healthcare costs and the largest of these platforms is GoFundMe.

Elements of a Great Crowdfunding Campaign

If you have decided a Keep-it-All (KIA) rewards based campaign is right for your business, how do you make your campaign stand out from the crowd?

Treat this as any other marketing campaign by

  •  Create a compelling video.
  •  Have a unique product or a unique story about your product, with a call to action statement.
  •  Enroll several team members with social media followings to help you launch your campaign.
  •  Use the team’s social media base and your qualified email list to get your campaign info out to the crowd.
  • Make the rewards something that will motivate the crowd and have different reward levels for different contributing amounts.   If you can find a social cause for your campaign (ie a giveback part to the community as part of your reward) you could receive additional support for your campaign.
  • Build up the campaign launch prior to the actual launch.    Keep the prospective crowd into the campaign as it goes along.
  • Announce successes during the campaign.    Motivate each week until the campaign is over.
  • Thank the crowd when the campaign is over and announce the success again.

Check out the SheEO Indigogo crowdfunding campaign that raised $34K.   It is a good example of  the key takeaways in crowdfunding  marketing.

 

Top 10 Crowdfunding Sites

Check them out before deciding which is best for your Company.

XL Consulting Group partners with small businesses for strategy, business coaching and all things ‘marketing’, including websites and social media.   Click here for a list of our services or contact us via email with your questions or call us at 905.639.3555.

Posted in Crowfunding.

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