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21/09/2017
Crowdfunding is when you use an online platform to raise capital, rather than the normal method of borrowing from the bank or seeking capital directly from angel investors, friends and family.
It allows businesses the freedom to raise capital from anyone; investors, customers, colleagues, peers, even strangers. Like anyone in search of funding, successful campaigns rely on a solid idea and a detailed business plan – including financial forecasts and cash flow statements – to convince people it’s worthwhile to support your venture.
Typically, an established third-party crowdfunding platform is used to promote a campaign page, with incentives for investors in the form of rewards or equity. A reward might be pre-order of a new product, or services offered in exchange for funding support; equity would be a share of the business offered in exchange for capital.
A good example is BloomVC. They are independently owned and operated in the UK, and are funded by some of the UK’s top entrepreneurs. Since 2010, they’ve assisted small business start-ups using the crowdfunding platform. They’ve helped small business owners with ventures from bespoke jewellery to a charity choir. There’s even a business that manufactures an environmentally friendly candle in Scotland that has benefitted from BloomVC’s assistance.
Crowdfunding offers a funding alternative for businesses that possibly don’t qualify for a loan, or don’t want to apply for a loan. It may be because you don’t want to have the obligation of paying a loan back, or you want to spread the risk of the business across a number of people. Crowdfunding can also give you exposure to a wide group of people, who may contribute knowledge as well as money.
Here’s what you need to know about launching a successful crowdfunding campaign, including information on three platforms designed to raise business capital.
Crowdfunding campaigns don’t tend to go viral; they gain traction because they appeal to the people you already know – your network – as well as investors who are searching for an opportunity and people who are in your target market.
Successful business crowdfunding campaigns have these things in common:
Here are three options for creating a winning business crowdfunding campaign:
Like any financial option, crowdfunding has its drawbacks so try to;
There’s also the question of intellectual property protection. Your IP will end up in the public domain, so you may decide to keep some information back. Funders can then sign a non-disclosure agreement or confidentiality agreement to protect you.
Crowdfunding can be a smart, cost-effective way to get funding for your business. It can also offer an unadvertised side-benefit: priceless feedback from your backers that can help tweak your idea before you move into production, allowing you to launch an even more successful business.
However, keep the challenges in mind. Remember: be crystal clear as to why you are raising funds and why others should support your project.
POSTED IN: Raising Funds,2017,Startup
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