If a startup has enough funds and capital, then it’s not a typical startup. The most common situation is when startups desperately seeking the required resources and investors to realize their brilliant ideas. Some of them know exactly that crowdfunding may become a real solution.
What is crowdfunding?
Crowdfunding is a process of raising capital through the collective efforts of like-minded fellows, friends, family members, customers, or after all individual investors. This is the most common crowdfunding definition.
Anyway, this method uses the collective efforts of a large pool of individuals basically via online channels such as social media and special websites.
Crowdfunding may be considered as the opposite of the mainstream approach to business finance.
Traditional capital raising means creating a business plan, market research, prototypes, shopping ideas around to a limited pool or target individuals, etc.
The crowdfunding approach dramatically streamlines the traditional model and gives startups a single platform to build, showcase, and share the resources.
5 benefits of crowdfunding for startups
Crowdfunding looks beneficial if compare it with the traditional methods. Here are the main advantages:
1. Reach. Crowdfunding platforms let thousands of investors explore, interact, and share a fundraising campaign.
2. Presentation. Working on your crowdfunding campaign, you look at your business from the top-level, revising its traction, history, offerings, and so on.
3. Marketing and PR. It is about available marketing and PR strategies, including online tactics. You are able to promote your campaign through social networks, forums, email newsletters, and other online channels. Using them, you will be able to steer traffic to your website and other company resources.
4. Efficiency. Crowdfunding enhance your ability to centralize and streamline fundraising efforts.
5. Concept validation. When you present the concept of the campaign to people, you have a chance to validate and refine your offering.
Investors will ask questions and express interest, so you will quickly understand see if there’s something missing.
Types of crowdfunding
In order to turn crowdfunding for tech startups into the fast and easy way to raise money, you should define which type is best for your business and what it requires.
Here are the most popular types of crowdfunding for startups:
- Equity crowdfunding for a startup business is the most traditional option. According to this concept, you sell a part of your business to an investor, who provides you with the capital to move the business forward.
- Donation crowdfunding is a good way if you are a nonprofit or local business. You have to create a campaign asking for donations for your business.
- Marketplace crowdfunding (debt) means the situation when a business owner borrows money from other individuals, instead of from a bank. He/she borrows at a set annual percentage rate and loans are often structured similar to the traditional business loan.
- Rewards crowdfunding – when funders are offered products, services, or gifts in exchange for a donation.
What are the best crowdfunding sites for startups?
Funding is always all or nothing. You must meet the goal you set within the allotted time or everyone gets their money back.
Some available online resources help talents to find the required resources to bring their ideas to life. Here are just some of them:
- Crowd Supply
- Funding Circle
Feel free to also study the list of essential marketing resources that will help in acquiring customers for your startup – 70+Top Marketing Resources For Startups
Quick steps for a startup business to launch a crowdfunding campaign
- Start with a plan and define all the steps ahead, using a cozy timeline or an online roadmap.
- Create a compelling crowdfunding profile, involving a pitch video, product images, graphics, etc.
- Set funding goals – how much money you want to raise.
- Announce your idea publicly
- Attract backers and try to reach out to potential partners and press contacts.
- Market to your target audience.
- Coordinates your fundraise and collect funds.