Crowdfunding has been around for quite some time now and seems to be consistently growing in popularity. It is basically a method by which those who are raising money for projects and charities can acquire funding in small amounts from a large group of people, hence the name ‘Crowdfunding.’ Let’s assume you have a small garage band and are desperately trying to raise enough money to cut a demo CD, Crowdfunding may be the perfect platform to obtain that needed capital. Maybe you have a great little home-based business that is aching to expand but you just don’t have the funds needed to take that next step, Crowdfunding may just be the ticket to raise capital for growth. These two examples may seem similar in their needs but should actually be thought of with different approaches, as their long-term goals may be very different.
Two of the Crowdfunding platforms I am hearing most about are the established Kickstarter platform and the up and coming NexTrend Crowdfunding platform.
Both are very similar in that they offer those needing to raise capital a venue from which to try and acquire needed funds and both do it quite adequately. The key points for these two platforms are that Kickstarter is established and fairly well-known, while NexTrend on the other hand is relatively new , but looks to be formidable, and for some maybe even better solution. In fact, since NexTrend Crowdfunding has only recently launched their platform they are not currently charging any fees to use their website. Both will work very well for small projects such as independent films, charities, and small business expansion, however when it comes to business growth and start-ups NexTrend will be able to assist in Equity Crowdfunding as its parent company is actually a well regulated securities firm that has been around for over 17 years . When starting your endeavor to raise capital, think about the relationships you build along the way and how they may help your future business needs should your current project gain momentum and require cash.
Creating the Crowdfunding pitch
It’s so important to understand about whom you are going to ask to contribute in order to get a large number of those people to part with their hard earned cash. Asking members of a rival university to donate money to help raise funds for new basketball uniforms for your school is probably not going to be productive, but if you are raising money to cut a demo music CD, you may already have an address book filled with friends and family who would want to see you succeed. Your audience must be targeted to those who have a rooting interest in your success; you can then expand that audience as needed. Remember that it’s human nature for no one outside of your inner circle to want to be the first to fork over donations, so it’s best to ask family and close friends to contribute first to get the ball rolling. Always be positive and upbeat, if you are not passionate about your project, why should anyone else be?
What do I get for my donation?
Remember these people are not professional investors and unlike Equity Crowdfunding (which could be available by end of summer of 2014) in which contributors want to be compensated with an ownership stake in a company, these people might like to get a little ‘schwag’ for their donation. Generally those who contribute get a little reward depending upon their level of contribution. An example might be using our Demo Music CD scenario is a copy of the CD for one donation amount and a tee shirt for above a specific higher amount, with perhaps a private concert for a substantial donation.
Social media and Crowdfunding
Social media platforms such as Facebook and Twitter are probably the most important aspects of using Crowdfunding to raise capital. You are basically handed a massive amount of potential contributors to your project and it is your job not only to get your project in front of them, but also to convince them to help fund it. All your email lists, your friend’s lists and their friends and so on should be considered. Use all means of contact to get your project seen. But remember this very vital point, have something to tell them that they will want to listen to! Think about all the Spam email you receive asking you to try this or buy that, to get someone to read what you are proposing takes skill and passion. Just because you created a Crowdfunding project does not guarantee people will visit it. NexTrend and Kickstarter as well as the other funding platforms are giving you the venue to raise capital; it is completely up to you to get people interested.
Crowdfunding key points
Understand all the elements of your project and how to convey them to the public. Your goals should be attainable. Don’t try and raise a ridiculously higher amount than you really need as people are not stupid when it comes to parting with their cash; make certain your goal is adequate to fund your project yet realistic. If you think your business has real potential for the future, look for a Crowdfunding platform that can not only handle your current needs, but your future ones as well. The building of lasting relationships can be one of your most important assets.