Crowdfunding is generally thought of as an “easy” way source of funding. It can be less complicated than a typical equity raise, but only if you select the right platform and do the prep work.
There are 1700+ platforms built to access debt, equity, and everything in between. Choosing the one that “fits” can be the difference between success and failure. There is a difference between the type of funding (loans, equity, pre-purchases, etc.) and the platform used to raise the funding. Each platform has its focus and strengths, so you need to optimize for your specific needs.
We are partnered with seven of the largest platforms and have spent a lot of time with founders to help prepare for a successful funding process.
Now, let’s dive in.
Think of crowdfunding as a big marketing campaign
Crowdfunding is raising money from a larger group to fund a project. Mostly from people who aren’t professional investors, but believe in what you are doing and want to participate. This looks a lot more like running a big marketing campaign, but for your business instead of your product.
If you have an existing group that follows your company or product, this is a great way to leverage those loyal fans into a broader base of stakeholders.
It’s a great way to test the waters
Crowdfunding is a great way to get the public’s input on your idea before you invest too much into it yourself, which will save both time and money in most cases!
Even though these platforms aren’t specifically designed to find new investors, some of the platforms like WeFunder and Republic do bring their own network of investors and even have ways to test your campaign before diving in headfirst.
Most successful campaigns start with an existing group that supports the company or brand. So, invite those customers, friends, family, and colleagues to invest in your business. The platform will tell you quickly if it will catch on more broadly.
It builds momentum for investors
Most investors base at least some of their decision on “third-party validation”. If you already have your own community investing, that by itself can be a reason for new investors to get involved.
If they hear others that are committed already or are seriously discussing the value the company is creating, it creates momentum. This momentum is critical to the success of a campaign.
A significant amount of preparation is required
Entrepreneurs typically underestimate the effort. This isn’t just a social post hoping to get a bunch of “likes”.
For most platforms, there needs to be a very specific business plan, including financials, progress to date, and what it will take to grow and return the investors’ money.
During the campaign, there is a significant amount of promotion and communication to potential investors. You will need to be responding to questions as they come up. Look at other campaigns on these platforms to get an idea of what this looks like.
Most successful for consumer products
The value provided needs to be clear enough for investors to understand why they would invest.
This can be any type of business but is typically easier with consumer products. If you have investors that are also customers, they are incentivized to help your company succeed. They will likely buy more products and tell their friends to do the same.
What funding structure?
You will need to decide what type of funding fits your intent for the company.
Are you willing to give up some ownership? Are you looking to get more of a loan that you will pay back over time? Are you seeking pre-sales to fund a product release? Are you hoping to access a grant that doesn’t need to get paid back?
Which crowdfunding platform?
A lot of the decision is also driven by how much you need to raise, for what, where, and from whom.
Different platforms specialize in different forms of funding, types of companies, investors, geographies, etc. There is also a huge range of fees, incentives, and services.
- What type of funding structure do you need?
- Does your company/product align with specific investor groups?
- Which platform provides the best opportunity for a successful raise?
We can help increase your chances of success
We would love to hear about your business and match you with a crowdfunding platform that aligns with your goals.
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