Crowdfunding is a rapidly growing movement that uses an online portal for entrepreneurs to attract money, insights, and marketing for their business from a local or global crowd. According to Forbes, the crowdfunding industry is on track to account for more funding than venture capital this year. Check out these tips on how crowdfunding can work for you:
Know the Basics
The two most popular types of crowdfunding are rewards-based and equity-based. Rewards-based campaigns offer supporters (“the crowd”) some type of reward for their financial contribution—usually a sample of the company’s product or service. Equity-based crowdfunding offers supporters equity in the company based on their contribution.
It’s important to note that many platforms will require you to raise 100% of your goal within a set time frame in order for you to actually receive the money your crowdfunding campaign has raised.
Use Local Resources
For small businesses, their greatest chance of success is found in their communities. Use this to your advantage when marketing your campaign and reaching out to and engaging your local networks. As a small business it can be difficult to compete with the stylized campaigns found on bigger crowdfunding platforms, so try to find a crowdfunding platform that accurately represents your business. For example, Alberta BoostR (now ATB Boostr) was created to help Alberta’s entrepreneurs reach their goals and grow their businesses.
Perfect Your Pitch
Your pitch is what will draw people to your campaign. A short, compelling video will be the heart of your crowdfunding campaign and does a great job of telling your story by answering what you’re doing and why you’re doing it. It’s also incredibly important to make sure you clearly state what you’re offering supporters in return for their money to build credibility so they feel confident supporting you.
Make It Worthwhile
Before you launch your campaign you’ll need to make sure your supporters can benefit from your campaign too. Provide a mix of intriguing products, services, and experiences as your rewards and try to have them all tie back to what your business does, as that will enable you to build an ongoing relationship with your supporters.
Ask yourself whether you would be willing to support your campaign based on the rewards you’re planning to offer. It’s important to be responsive to what appeals to the crowd and to add or edit rewards throughout your campaign to maintain interest among them.
Leverage Your Networks
The sooner you can get people on board with your campaign, the better. Aim to have 40% of your goal raised through your networks by the time your campaign launches. This “love money” (from friends and family) will make it more likely that other people will get engaged, as a campaign reaching a significant percentage of its goal in a short period of time will attract more attention.
Run the Numbers
You’ve got to make sure your goal is feasible so that you’re able to benefit from your crowdfunding campaign. Roughly 3% of people viewing campaigns will fund them, and the average campaign contribution is $25. You’ve got to figure out how many people you’ll need to drive to your campaign and how many of them you’ll need to fund you.
A campaign is ten times more likely to reach its goal once it’s 50% funded. You can increase the likelihood of getting financial contributions by being honest and clear about what you’re trying to achieve with the money you raise. This can help get the ball rolling to, and passed, 50% of your goal.
Crowdfunding is hard work! It’s important to make sure your goals are realistic and that you’re able to put in the work required to get there. You’ll need to continuously establish credibility with your audience—from your pre-launch preparations to avoiding crowd tune-out throughout your campaign. If you do, not only are you raising capital, but you’re also getting attention and growing your customer base!
Business Link and ATB Financial work together to help entrepreneurs reach success. Visit ATB Financial online today!
