What is crowdfunding?If you haven’t yet come across these crowdfunding sites, you may be wondering just what in the world it is and why you should care about it. Simply put, crowdfunding is a means to generate the finance for a new product or idea without relying on banks or other business investors.
Through sites like these, you can post a proposal directly to your potential customers and audience. They can then choose to support your project by pledging towards your funding goal. In exchange, the ‘backer’ typically receives the product upon completion, as well as a set of perks offered by you to encourage higher donations. Reach your goal, or even exceed it, and that money is yours to put towards the project.
This process is not only a great way of securing finance, but it also acts as a proof of interest in your product. This makes it a much more helpful source of finance than traditional investors and can even be a factor towards winning over these investors if you can back up your product with numbers that wish to own or use it straight away.
So, how do you go about crowdfunding a business idea? Let us tell you.
Setting UpThe basic steps to crowdfunding a business idea are:
- Setting your target
- Choosing your crowdfunding site
- Making your proposal
- Spreading the word
Your TargetYour goal is not simply a budget to complete a project. You need to factor in the costs of creating and sending out any backer rewards you plan to offer, as well as the fees of the crowdfunding site and any advertising you plan on running to support the campaign.
Once you have an overall amount to aim for, you then need to ask whether that amount is realistic for your means. If you post your campaign asking for too large a number, you may struggle to find the support needed to raise that amount. Either you may come across as greedy or backers may simply not think that target can be reached. If you absolutely cannot aim for less, you should consider splitting the campaign. Break down your idea into stages and look to cover the idea one step at a time. The first campaign can even act as a gauge for interest in your overall idea.
Your Crowdfunding SiteThe number of sites dedicated to hosting crowdfunding projects is growing all the time, and each will have their own unique positives and negatives. We put together a list, here, of some of the better sites for crowdfunding. Take your time to research and find the site that can offer you the best deal and support for your project to make sure you don’t start out with a disadvantage that could ruin your project before it starts.
Making Your ProposalOnce you know what you are aiming for, you need to set out a solid proposal to get people to believe in your product enough to back it. In essence, this follows standard marketing practice. You need to show potential backers just what your idea is for and why it is worth backing. Leading your presentation with the problem you have looked to solve before explaining just how your idea will achieve that will be more compelling than simply listing what your idea will do.
If you have made the decision to split your crowdfunding into multiple projects, you may want to consider including the rest of the project in your first proposal as stretch goals. This means listing additional stages for your overall idea, along with the budget you would need to cover that stage. This is a great way of compromising a large target with ensuring a successful project and can help generate excitement as backers encourage others to push you towards each next stage.
To support your proposal, you may offer rewards to backers based on how much they have contributed. Make sure the tiers you set up will cover the cost of producing and distributing these rewards, as well as contributing to the overall total.
Spread the WordCrowdfunding a business idea is totally reliant on people power. If no-one knows about it then you won’t receive their backing. It is absolutely essential that you go into crowdfunding with a solid audience that can get you started and help to spread the word. Using all the means available to you, you should look to make people aware of your crowdfunding project in advance of you posting it. Email your mailing list, post regular updates on social media and add the news to your website for new customers to see. If you can guarantee a good amount of your funding before you even launch the campaign then it makes your project a much surer bet for success.
It is also worth considering making use of paid advertising services, such as Google AdWords and Facebook, to promote your campaign. You can reach a wider audience and draw greater attention to not only your campaign but your company as a whole. You may find you end this campaign not only with a successfully crowdfunded project but with a whole new group of customers as well.