Cash in on CrowdFunding

Mallorca oranges

You might ask ….

´Well what is CrowdFunding?´

Most times when I mention the word ´CrowdFunding´ I get a blank look, but I venture to guess that it will not be long before it becomes a household term.

Interestingly enough CrowdFunding is still not an accepted word in most English dictionaries. We do know however that it is 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 ´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.

CrowdFundiing 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 to ask your circle of influence to help you by going to a designated page online and supporting you financially in your business idea or project.

CrowdFunding platforms are now springing up all around the world. By the beginning of 2012 a study found over 400 CrowdFunding platforms had helped raise more than 1.5 billion dollars for thousands of projects across the world.

Would you not want to be one of those projects?

Well now you can!

Andy Haldane, an executive of 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 strategy 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 three main areas. You can:

  • ask for donations and offer a reward in return
  • offer equity in your business
  • ask for and accept loans at an agreed interest rate and repayment period

As CrowdFunding is a new term not everybody agrees to what exactly falls under the umbrella of the term CrowdFunding. The are other forms of CrowdFunding but the three listed above constitute the three biggest areas.

Online CrowdFunding platforms will mostly fall into one of the above categories but some are now offering a mix of two or all three of the above methods.

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. Then find out the best CrowdFunding platforms that best fits your project. Take the top five 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 (one project has raised over 10 million dollars – they only asked for 100 000) however there have been some 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.

To your CrowdFunding success.