Whether it is a new product you are launching or looking for funds for a startup, crowdfunding is the best option. Crowdfunding is now one of the most popular ways of collecting funds for something new.
Have you heard of Kickstarter, Indiegogo? These are crowdfunding sites. But don’t worry if you are not too familiar with crowdfunding. In this article, we will explain crowdfunding and the benefits of crowdfunding. So, let’s begin.
What is Crowdfunding?
Let’s start by explaining what crowdfunding is. It generally refers to collecting money/ funds from the people for supporting a campaign/ project. A crowdfunding campaign is opened and people will donate funds to it if they like it. In exchange for their funds, you can promise them a full unit of the product. Or you can give them equity.
Usually, a crowdfunding campaign will have a target and a deadline. For platforms like Kickstarter, that deadline is usually two months. And if the campaign fails to reach its target goal, the collected funds are kept by the platform. But now most of the platform gives away the collected funds. So basically, that is crowdfunding.
How to start a crowdfunding campaign?
Now that we know what crowdfunding is, let’s move to the next part. How to start crowdfunding? Starting a crowdfunding campaign is fairly simple. First, you need a product or something to raise money/ funds for. Second, you need a platform to promote your campaign to encourage funds.
There are lots of ways you can start your crowdfunding campaign. You can start by putting your product on a crowdfunding site. You can also do the same by purchasing your very own white label crowdfunding software/ platform.
You can also start by making your very own crowdfunding sites from scratch. All three procedures have their benefits and advantages, but they all have some similar key procedures.
Down below we have summarized a basic how-to procedure for starting your crowdfunding campaign. They all may apply to whatever method you choose to start your crowdfunding campaign.
Prepare a product
The first thing that you need for crowdfunding is something that the public will like. It could be a product. Or it could be a startup. That depends. As long as it is fundable by the crowd, it will work.
Make sure to put some effort into research before developing your product. Also, develop a prototype of the product to prove your concept is practical.
Pick a platform for promoting and encouraging funds
Now it is time to pick where you will launch your campaign. You can pick multiple crowdfunding sites together. For example, launch your campaign in GoFundMe, Kickstarter, and Indiegogo.
Or you can buy your white crowdfunding software and rebrand it for all your crowdfunding projects. The initial cost will be high, but you are free from paying platform use fees that you had to pay with using Kickstarter and others. This will reduce the cost long term.
Design your campaign to make it look appealing
Whatever platform you have chosen, you need to make your campaign appealing. Try to present the concept of the product with photos and videos. Make them with contexts that everyone can relate to.
This will encourage more funders to back your campaign. The more the funders, the higher the success rate of your campaign.
Set up a payment gateway
A lot of people overlook this part, but the payment gateway you use has a huge impact. If funders see a very unfamiliar gateway for funding your project, they will not fund it.
You must use a familiar, secure and trustworthy payment gateway. Also, integrate multiple gateways so that everyone can fund your campaign.
Decide what the funders will receive in exchange for funds
The last thing to decide is what you will provide to your backers in exchange for their funds. It is very common for them to receive a complete unit of the product in exchange for their contribution.
But some provide exclusive premium items instead of the product. One highly incentive reward is equity. Or you may call it profits of your business with this product.
While equity seems to be the best choice, there is a lot of work and barriers you need to overcome to implement this system.
If you can overcome them, then go ahead. But it’s better to settle down for a convenient incentive.
Benefits of crowdfunding
Crowdfunding reduces your financial risks. Traditional businesses go all out on a product and take it to the market in huge quantities. If the customer does not like their product, everything will be at loss.
But on crowdfunding, you have an idea and make some working prototypes of it. Show it to the people and ask for their contribution if they want it. If they want it, they will fund it. This will allow the campaign runner to anticipate how big his/ her market will be.
Gives you market exposure before going into business
As you are exposing your idea to the market and asking for funds from the people, you can get practical market exposure. You can also engage with the crowd and ask for their suggestions to improve your concept.
That way, you can develop a better product by the time your funding is complete.
Helps you build a loyal customer base
As you are engaging with your customers, you are building trust. If you can keep that trust and foster it, it will build a loyal customer base for your products.
And these are the main benefits of crowdfunding. A lot of traditional companies fail to achieve these three. But with crowdfunding, you can easily achieve them.
Crowdfunding has a lot of benefits. It lets you reduce the risks of launching a new product, understand its value in the market, and plan before you even launch the product for mass production.
The fact that starting a crowdfunding campaign is so easy gives you enough reason to use this method instead of traditional ones.
So next time when you are launching a new product, try using crowdfunding platforms. You will surely love it.