Looking to raise money for a business or a startup?
In 2020, crowdfunding is a great method to get funding for a new business venture. Tons of other entrepreneurs are using it to supercharge their company, and you can too.
In this post, I’ll share with you two types of crowdfunding and how you can leverage these to finance your startup.
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For now, let’s talk about how you can use crowdfunding for an injection of cash into your business or startup and supercharge your vision for the future.
Should I Use Crowdfunding?
There are two main types of crowdfunding that your business can utilize: rewards-based and equity crowdfunding.
In general, if you’re looking to ship out a physical product, then crowdfunding is usually a great bet.
If you’re offering a service, on the other hand, such as coaching or consulting, then crowdfunding might not be the most fruitful route. These types of campaigns have struggled in the past, and are usually better suited for other methods of fundraising.
Typically, these types of projects will be best suited for a crowdfunding approach:
- Hardware
- Fashion
- Gaming / board games
- Design products
- Apps & software
Rewards Based Crowdfunding
Rewards based crowdfunding is the most prevalent method of crowdfunding in the industry, and mostly takes place on two major platforms: Kickstarter and Indiegogo.
With this method, backers who donate to your campaign will receive a reward in exchange for their money. These rewards are usually tiered based on donation amount, and should create excitement and urgency surrounding your product.
You have to deliver on these rewards after you reach your fundraising goal. The fulfillment stage can be a complicated process, but it’s the bread and butter of your campaign. It’s where the magic happens, as your product finally gets into the hands of the people that support your idea.
My book, The Kickstarter Launch Formula, goes way more in-depth about everything you need to know about rewards based crowdfunding; I wrote it specifically to help entrepreneurs like you discover everything there is to know about this style of funding.
Equity Crowdfunding
When you launch a campaign with an equity crowdfunding platform, you are giving people an opportunity to invest in your company in exchange for their money.
These people aren’t backers like rewards-based crowdfunding donors; they are investors.
You are giving away equity in your company to individuals for partial ownership, similar to the process of buying stocks in a large, publicly traded company.
I’ve also written a book on this topic: Equity Crowdfunding Explained. It’s got tons of helpful information and tips for launching a successful equity crowdfunding campaign.
Elements of a Crowdfunding Campaign
Whether you’re using a rewards-based or equity crowdfunding approach, there are some elements of a campaign that will be consistent for both methods.
Firstly, you will need a killer video. This video serves as your initial pitch to a potential backer or investor, and is the first thing people will see when they encounter your brand.
The video should demonstrate:
- The assets of your product
- The high-level features and functionalities
- How people can use the product to improve their lives
The video arouses people emotionally and gets them excited about your product. It’s the bread and butter marketing of your campaign. Don’t think of it as an instruction manual or business-like presentation; it should be geared towards consumer wants and needs (like a commercial).
In addition to your video, you should also include images and gifs.
These go a long way in telling your story, and can push into the more intricate details of your product.
The images sell the story. While potential backers will read some of your campaign text, the human eye is most naturally drawn to images. They should be engaging and demonstrate how your product solves a problem!
You’ll also need to set a funding goal and duration for your project. This is the aspect that creates urgency surrounding your campaign launch.
The funding goal is how much money you will need to make your product a reality.
In crowdfunding, you want to set as low a fundraising goal as possible. This is because once you hit your goal, you will start trending on your platform and have the opportunity to blow way past that initial figure.
The duration of your crowdfunding campaign is a way to build an idea in the consumer’s mind of scarcity and a need to take action now. Most campaigns run anywhere from 30-60 days, with the final week serving as a boost in funding due to urgency.
As mentioned earlier in this article, you will have to ship out the products you’ve promised in the fulfillment stage, which occurs after your campaign duration has come to a close.
The end of the campaign itself is the beginning of the process, not the finish line. You have to manufacture, store, and ship your product, which can be pretty intensive.
Conclusion
I hope that you’ve taken some valuable ideas from this article, and recognize the potential for crowdfunding to go to work for your business startup.
This was a crash course to introduce you to the crowdfunding concept, but I have a ton of other great resources out there that go way more in-depth.
You should check out my Youtube channel and blog for more great content!
Think you’re ready to launch a campaign for your product? Request a free coaching call with me; I’ve worked on tons of successful campaigns, and would love to make your dream business startup a reality!
