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Using Crowdfunding to Grow Your Business
Crowdfunding takes many different forms, but the principle is raising small amounts of money from friends, families, coworkers, and others in your community. With the right fundraising strategy, crowdfunding is a powerful tool to help start-ups and existing businesses raise the capital they need to start or grow.
Before making a page on a crowdfunding platform, businesses owners should create a solid business plan and a detailed strategy for how they'll activate their network of supporters.
The Pace SBDC is here to help businesses successfully crowdfund with no-cost business strategy sessions. Contact us to make a no-cost appointment with a Certified Business Advisor.
Strategizing for a Successful Raise
Step One:
The most important part of any crowdfunding campaign is the planning phase. Business owners should budget the exact amount of funding they need to achieve their goals and deliver on the promises of their campaign, discover who their network of potential supporters consists of, and make a detailed plan for activating that network and compelling individuals to give.
Entrepreneurs interested in crowdfunding should spend time renewing their relationships with anyone they haven't spoken to in some time but would like to see support their crowdfunding campaign. Like business, crowdfunding is all about relationships and establishing and renewing positive relationships is a key first step towards successfully running a crowdfunding campaign.
The last step in the planning phase is choosing a crowdfunding format and platform. This decision involves balancing overall business strategy with the preferences of supporters and needs of all business stakeholders. Be sure to understand the fee structure and how any given platform operates before making a choice.
If you'd like to talk out your relationship reinforcement strategy with a NYS Certified Business Advisor, contact the Pace SBDC for a no-cost, one-on-one business strategy session.
Choosing a Raise Style & Platform
Step Two:
Reward Crowdfunding: As the name suggests, this type of crowdfunding asks supporters to give in exchange for a prize or reward. These incentives can be related to the business or unrelated and some examples include a personalized thank you, merchandise, and credits to use towards future product or service purchases.
Some reward crowdfunding platforms include Kickstarter, Indiegogo, iFundWomen, Patreon, and Fundrazr.
Microloan Crowdfunding: Crowdlending involves raising small amounts of money from many individuals that the business will pay back, similar to a traditional business loan. As business owners make monthly payments on the loan, their supporters will be repaid in small installments.
Kiva is a microlending platform that allows entrepreneurs to raise up to $15,000 at 0% interest.
Investment Crowdfunding: Investment crowdfunding turns supporters into shareholders or other investors, and it is best for businesses looking to raise larger amounts of financing. It also involves legal fees and a more thorough pitch to supporters, so it is best for existing businesses on solid financial footing.
Some investment crowdfunding platforms include Mainvest, WeFunder, Honeycomb Credit, and Common Owner.
Donation Crowdfunding: For businesses with lots of community goodwill or mission-based startup businesses, crowdfunding without offering an incentive could be an option. Donation crowdfunding relies on reputation and relationships to raise funds in exchange for nothing in return.
Some donation crowdfunding platforms include GoFundMe, GiveButter, and Fundly.
A business's raise style affects not only their crowdfunding campaign, but their business generally. Speak to a Pace SBDC Business Advisor for no-cost advice and guidance on this topic.
Creating the Campaign Page
Step Three:
Crowdfunding is storytelling, and a good campaign page answers the who, what, where, when, and why of both a business generally and their fundraising goals. When setting up a crowdfunding page, be conscious of who your target audience is and tailor your storytelling approach to speak to them.
Visuals are crucial to a successful crowdfunding campaign, and most successful campaigns include a promotional video, multiple high-quality images, and compelling graphics to illustrate key portions of the business' campaign.
We encourage businesses to review their crowdfunding campaign pages with a Certified Business Advisor at the Pace SBDC. Contact us to schedule a no-cost appointment.
During the Campaign
Step Four:
Every day of a campaign counts, and a well planned crowdfunding campaign will detail each day's key tasks and milestones and how the business intends to reach them. Keeping momentum is crucial, as audiences tend to only support campaigns they believe will be successful.
A few examples of how businesses engage supporters during crowdfunding campaigns include phone banking, email marketing, hosting parties and other events, sending direct mailers, performing product or service demonstrations, and running online ads.
Running a crowdfunding campaign requires focus, determination, and support. Contact the Pace SBDC for no-cost, personalized advice launching and running your business's crowdfunding campaign.
Keeping Supporters Engaged
Step Five:
Once a raise is completed (even if a business doesn't reach its funding goals), an entrepreneur should focus on thanking each supporter and keeping them updated on the business' progress. Maintaining good relationships with your supporters can turn them into potential customers and enable another fundraiser in the future.