By Ismet Balihodzic
Are you looking for money in all the wrong places? Banks, angel investors and venture capitalists don’t seem too willing to put their faith in eager entrepreneurs these days. So, if you’re tired of hitting funding hurdles, give crowdfunding a try.
What is crowdfunding?
It’s an increasingly common practice that allows entrepreneurs to bypass angel investors and venture capitalists by directly asking people to invest in their company, typically online. The investors are regular people who chip in small amounts of money to help you achieve a stated monetary goal, simply because they’re inspired by your idea and want to see it grow.
Based on the principle of crowdsourcing.
An example of a crowdsourcing model is Wikipedia, an online encyclopedia that is completely written by users, containing over 3 million articles in English. A large number of people all put a little effort in reaching a big goal together. Some famous crowdfunding initiatives are SellaBand and KIVA, but also president Obama used the power of the crowd to fund his election campaign in 2008 and raised 137 million dollar by using crowdfunding!
How does it work?
1) Choose your funding model
If you choose the donation model and decide to offer rewards, you will need to think about the ‘tiers’ you offer.The more money people give you, the ‘better’ the reward you offer them. Think about how and when you will deliver rewards to the individuals that make up the crowd.
2) Write a good pitch
Perhaps the most important element is the initial script on the campaigns page. No matter the model you choose, your writing needs to draw the attention of the reader. Think carefully about what you are going to say and how you want to present yourself.
3) Keep your crowd updated
It is essential you keep the crowd informed of your progress throughout your campaign. Steady publicity is vital. You don’t want a situation where you almost get to the target, but then simply run out of steam.
4) Plan your timeline carefully
Since most crowdfunding websites ask you to set a time limit for your campaign, you should plan this timeline out carefully. Think about when you want key events to happen, like updates or certain target milestones.
5) Plan for the end of your campaign
So, you have successfully raised the target amount for your project – now you have to deliver on the promises you have made.If you went over your target, this may include promises about what you are going to do with any extra money you have raised.
And if it doesn’t work? PLAN B
Equally, when thinking about the end of your campaign, you should ensure you have a ‘Plan B’. If you fail to raise the target, what are your options? How will you continue to get support for the project? These are the questions that most people put off until the end of the campaign. By then, if things haven’t gone to plan, they are often ready to give up altogether.
Remember, there’s nothing to stop you from trying again. Perhaps a different website would be better, or just waiting until the time is right for your project. These are issues that must be taken into consideration in any good plan.