How to Use Crowdfunding to Start an E-Commerce Brand

by Alex Feldman

September 15, 2020

How to Use Crowdfunding to Start an E-Commerce Brand

If you have spotted a gap in the online market, you might be ready to launch your first e-commerce store. Yet, a lack of money in the bank could be stopping you from making your dream a reality.

If this sounds like you, you’ll be happy to learn that you can secure the funds to create a successful e-commerce business with crowdfunding. 

If you’re unsure how to do so, keep reading to learn how to use crowdfunding to start an e-commerce brand.

Familiarize Yourself with Different Crowdfunding Platforms

There are various crowdfunding platforms to choose from that will allow you to pitch your idea to potential investors. Many million-dollar companies have used this method for kickstarting their ventures, such as Popsocket, Oculus VR, Brooklinen, and MVMT.

While there are various platforms to choose from, some of the most popular include:

  • Kickstarter – more than $3 billion has been pledged on the platform
  • Crowdfunder
  • Indiegogo
  • Rockethub

It is, however, a wise idea to research each platform to ensure you pick the right option for your budding business.

Understand How It Works

Crowdfunding will allow you to pitch an idea to potential investors on the platform, who can choose to contribute to your company’s financial target. Unlike traditional investment strategies, an investor will not own a large stake in your e-commerce business. 

There are different types of crowdfunding, such as:

  • Investment-based – an investor receives a stake in the company’s return
  • Loan-based – a person lends money to a company or individual in return for a set interest rate (also known as peer-to-peer lending)
  • Donation-based – a person donates money to a project, and they could receive something in return, such as a free product
  • Reward-based – a person gives money in return for a specified reward

Learn About Risk

Like any investment model, there are pros and cons to crowdfunding. While it can fund your e-commerce business, there are various downsides, such as:

  • Someone could steal your concept before it launches
  • It can be time-consuming to reach a large financial target
  • There’s no guarantee you’ll hit your desired amount

It is, however, important to note that your investors might also be taking a risk on your business. For example, your company could go bust and they’ll receive no return on their investment. Also, if your business relies on a third-party e-commerce platform, like Amazon, your operations could grind to a halt following a suspension. If this happens, your investors will need to wait for their money or reward when appealing a suspension with

Perfect Your Pitch

If crowdfunding sounds like the ideal investment option for your e-commerce brand, you must perfect your pitch to increase the likelihood of you hitting your financial target.

For example, you must:

  • Feature a logo, photos, and compelling information about your business idea
  • Provide videos to grab attention
  • Submit press releases to grab the attention of influencers
  • Provide an incentive, such as free samples or an investment promise

Also, look at other compelling and successful crowdfunding pitches on a platform to identify engaging tactics.