What is Crowd Funding and Does It Work?

As a small business owner or startup entrepreneur, at one point in your business life cycle you will wonder about funding your small business. When you start looking at all of the options on how to fund your startup venture, or how to grow your existing business the obvious funding choices are there: friends, family. personal savings, credit cards, bank loans, lines of credit, government funding and private investors. But one option that seems to often slip peoples minds (maybe since it’s a bit newer) is Crowd Funding.

What exactly is crowdfunding?

Most likely you’ve heard somebody talk about crowdfunding, or you’ve heard it on the news about the big crowd funding platforms such as KickStater and Indie GoGo. The industry that revolves around crowd funding simply explored over the last few years with campaigns where small business owners and entrepreneurs attract attention of massive crowds who invest their money into the business startup either for a return on their investment (upon success), potential debt or equity of the business or a simple reward (like a demo product).

Crowd funding is a great way to kick start your small business growth and attract the online attention of thousands.

Simply put, crowd funding is the attracting a large number of people (a crowd) to provide you with a small amount of money which is considered an investment in your business with a promise that once the business starts, the investors will get their return (whatever that may be).

The key to a successful crowdfunding campaign is to attract the audience with the business idea, and a valuable offer – making sure that people will see it as attracting and will want to invest.  As a business owner starting a crowd funding campaign, you will have to be able to convince the potential investors to put their small amounts of money into the business with the expectations of rewards in the future.

Great, but how do I start a CrowdFunding campaign?

There are many different ways to get started. Before you do get started, be sure that a crowd funding campaign is right for your type of business. Even though any type of business can work with the right attraction, it may be more difficult for some versus others.

Initially you want to select a crowd funding platform to use to start your campaign. You can select the big ones such as CrowdFunder, KickStarter, Indi GoGo or select a funding option from CanadaStartups.org

The next step is to make your business (idea) very enticing. This is basically your sales page, so be sure that it is short, and the perfect pitch that will ensure potential investors are stuck to you. You can even consider using the Investor PitchDeck offered by us to help you create your pitch.

Be sure to offer a good reward for the small investment. Don’t just think that a simple thank you will be enough of a reward for somebody investing in you and your idea. Instead consider maybe offering a early sample access to the product or service you are offering, or potentially a discounted price and extra goodies. You have to be able to show people that they will actually get something back from their investment.

One important step that you can’t miss out on is creating appropriate investment levels. Think of it this way; if you are offering a service that costs lets say $100. You can’t expect a person to invest $100 with no return (or just a free product), instead make your investment levels in the range of $25, $50, $75 and $100, and plan out the different rewards for the different amounts. You don’t want to turn away anybody.

And finally the most important and crucial step, be sure to start the campaign off right and share share share. No matter how good your idea, or your business is or could be, if you don’t tell anybody about it – nobody will know of it. Social media is your friend in this case.

Ok, but can I really get funded this way?

Generally speaking Yes. If you have an attractive crowd funding campaign, with the appropriate investment levels, and a quality offer (business, idea, product/service), and you attract the right audience, there is no reason why your crowd funding campaign may fail. However, at the same time you do need all of the mentioned factors to come into play in order to succeed online with a crowd funding campaign. But, crowd funding is dependent on that, and the amount of work you put into your campaign to get it noticed and out-there, the more likely you are to succeed.

And once again, crowd funding may not be right for you, so be sure to consider all other options of funding for your small business as well.