´Well what is Crowdfunding?´
Most times when I mention the word ´Crowdfunding´ I no longer get a blank look and it has now become a household term. It is now in regular and growing use around the world.
You can of course gather some information from the two words themselves. 'Crowd' as in lots of people and 'Funding' as in lots of money. You can rightfully surmise that it is all about obtaining money from the crowds. And if you think that you would be correct.
Crowdfunding started to gain acceptance as a word around 2006. It followed on from the now well known phrase CrowdSourcing which started to gain popularity earlier in 2004.
Crowdfunding is not a new concept (it has been around as long as mankind) but what is new is the way money is now collected online from the crowd.
The internet has changed all that. It has now become easier for you to ask your circle of influence to help you by sending them to a designated page online and asking them to supporting you financially for your business idea or project.
Crowdfunding platforms have now sprung up all around the world. There are now thousands of them and collectively now help raise tens of billions for projects world wide every year.
Would you not want to be one of those projects? Well now you can!
Andy Haldane, an executive at the Bank of England sees crowdfunding as a potential rival to traditional banking.
Seeing that banks are less supportive these days there is now a meaningful alternative way to raising finance.
However you need to know that there are different types of crowdfunding and before you start raising money online you must establish which type of crowdfunding is best suited to your project.
Briefly and very simply crowdfunding can be separated into six main areas.
1. You can ask for donations
2. Offer a reward in return for someones investment
3. Provide equity in your business by offering share ownership
4. Borrow money in the form of a loan to be paid back with interest
5. Raise funds via cryptocurrencies such at Bitcoin
6. Create content on a regular basis for a monthly subscription
There are other forms of crowdfunding but those listed above constitute the biggest areas.
Online crowdfunding platforms will mostly fall into one of the above categories but some offer a mix of two or more options.
Now that you know you can raising money online where do you start?
I would suggest you establish which type of crowdfunding you want to do first. Then find out the best crowdfunding platforms that best fits your project.
Take the top two websites and spend a few weeks following other projects and track how they do. Record ideas that you think would work for you.
Plan and build your own project. Make sure you then start to grow your online support base (without this you will not succeed).
Pitch your project and follow progress. Remember to thank those that support you as you go along.
Once you have reached your target make sure you offer progress reports. Ultimately you must deliver on what you have promised otherwise you will never be able to raise money on the internet again.
There have been some amazing successes (several projects have raised over 10 million dollars where they only asked for $100 000) however there have been many failures as well. Not all projects get funded either. Many crowdfunding platforms work on the basis that if the target amount is not raised then the project does not get funded.
Many will find that crowdfunding is easier than raising money from a bank or from select individuals.
Crowdfunding however will never replace banks. It is just another way to attract interest and support and will normally come before Angel or Venture Capital funding.
Check out these curated crowdfunding resources to help you prepare for your own campaign.