What is crowdfunding?
The meaning of crowdfunding is raising monetary contributions from a large number of people for a project or venture, raising $34 billion through this alternative means of finance in the year 2015. The analysts forecast the global crowdfunding business to grow at a CAGR of 26.87% during the period 2016-2020.The internet is the medium through which this concept is being executed. You can also get it through mail order subscriptions, or benefit events.This article on crowdfunding strategy answers the following questions for people or businesses thinking about using crowdfunding to raise funds:
“What are the successful elements in a crowdfunding campaign?”
“Which are the best crowdfunding sites for my business?”
“What do my funders get?”
“What is the best strategy for my crowdfunding campaign”
Choose Your Platform
Picking the right crowdfunding platform will certainly help you realise your fundraising or crowdfunding goals. Hence you need to decide whether you are going for a reward – based crowdfunding or equity crowdfunding (Where people become actual shareholders in your company).
Reward based Crowdfunding
In rewards based crowdfunding (not investment) you may opt for crowdfunding platforms like Indiegogo and Kickstarter. However, there are other communities and platforms which focus on music, healthcare, and non-profits etc. Choose a crowdfunding platform by looking at its existing community base and the way they design their fundraising product.Kickstarter a crowdfunding website has a clear principle. It is only funding those ideas which have achieved their initial funding goals, funding successfully creative projects. However, crowdfunding sites like Indiegogo have a different approach. Their product with some extra payment (up to 9%) allows you to keep the money collected during the campaign.
People can join your campaign by becoming shareholders for a positive return in future. Crowdfunding investment through this route is known as Equity crowdfunding. Crowdfunder and Circle Up are two major crowdfunding agencies you can consider.By taking a percentage of the funds raised during a campaign, is how Circle Up charges its customers, whereas Crowdfunder.com charges a standard monthly fee.
Prepare your marketing pitch and story.Competing for a viewer’s attention on the internet is quite challenging. As there are many other diversions online. Hence your initial sales pitch and message in the story should grab your investors’ attention.Keeping them engaged both rationally as well as emotionally. Answering questions like what and why you are doing?Telling a great story is an art. It can be about you, your product, your company, or your customer etc. So prepare an engaging story. Set it in a neat package. Create a clear and compelling request for your investors. For greater impact prepare a video.
What do they gain from it? What is in it for your investors?
Hence, developing a reward system for your investors will ensure a healthy funding. Build a unique offer that they simply can’t refuse. Take a cue from successful campaigns. Ask yourself would you buy this reward yourself? If yes, then promote this system in your sales pitch and in your marketing story.
Engage your first level of network: Engage your first line of supporters i.e., your family, relatives, friends etc. As these are the people who will help you achieve your fundraising goals faster. Those campaigns which are moving at a rapid rate attract more attention and funds.
Have your creative marketing plan ready. An enormous amount of time and hard work is being spent behind creating the perfect marketing plan behind every successful crowdfunding campaign. Pushing this campaign to launch and achieve the funding goals at or above it. Proper structuring and finishing of all the legal requisites is important before going for equity crowdfunding.Maintaining proper communication and constant engagement throughout the crowdfunding campaign are important.
Get your numbers ready. Even though crowdfunding business has been expanding at a rapid rate, it remains to be seen what it means to you. Say for example you want to raise funds to the tune of $50,000/- through the crowdfunding route.On an average $25 per person is contributed states Kickstarter. Hence, to collect the above amount we need at least 2000 qualified people.To collect 2000 people we need to connect with 66000 qualified leads as the common conversion rate being 3%.Considering that your crowdfunding campaign runs for 45 days.It is plenty of traffic. Keep a tag of your fundraising goals, and monitor it from time to time.Lowering the amount of investment per investor will not only reduce the risk for each investor but it will also increase the number of people who invest online.
Crowdfunding has certainly changed the game of fundraising. So jump on the bandwagon of innovation and let the engine of crowdfunding propel your business.