1: What is Crowdfunding?

Crowdfunding is defined as “the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet.” It’s a relatively new phenomenon and a rapidly growing industry that is revolutionizing the way that new ventures receive funding. 

The Old Way

The New Way

Before crowdfunding, one of the most common ways for new ventures to receive funding was to get a bank loan. Banks would use the money they collected from their customers to help fund these ventures and profits made were used to provide interest to bank customers. However it’s very difficult for small businesses to receive sufficient bank loans nowadays.

Crowdfunding cuts out the middle man (the bank,) and allows people to directly invest in the projects they choose. This way investors can choose exactly how they invest their money and how they are rewarded. With crowdfunding, many small projects that would go unfunded now have the chance to receive the funding they desperately need.

Benefits

  • Validating the Market:

    Test the demand for your product.
  • User Marketing:

    Create hype and publicity for your idea
  • Customer Acquisition:

    Find early adopters before your product is released.
  • Feedback:

    Receive input and improve the idea.

Challenges

  • IP Protection:

    Even with protection from copyrights and patents, displaying your ideas to the public puts them at risk.
  • You must be extroverted:

    You will expose yourself to the whole world.
  • Need Crowd:

    Without a network you will not be able to raise money.
  • Trust:

    Need to build trust with your backers.

Are you sure crowdfunding is for you?

Crowdfunding requires a lot of work and more preparation than simply launching a campaign on a site. You must plan out a way of inviting a crowd to your page and how to encourage them to invest money. If you don’t have a good network to reach out to, crowdfunding may not be for you. It’s best not to think of crowdfunding as selling your product or idea, but actually selling a story to people that makes them feel good about investing money. If you would prefer a more traditional method of funding, consider seeking help from consulting services.


2: Choose a Platform

Before you start It’s very helpful to search past campaigns for similar ideas to get a picture of how (or how not) to do things. Searching past campaigns is easy, just use the search bar below!

Choose a Platform Type

Most projects would receive no funding if there was no benefit to the backers. That’s why each crowdfunding website offers different ways for projects to give back to their backers. The five different types of funding are donation, reward, debt, equity and royalty.


Consulting

Need help finding out which platform is best for you?

 DonationRewardDebtEquityRoyalty
Give Back to InvestorsA Simple ThanksGood or ServiceInterest on PrincipalOwnership of BusinessPercentage of Revenue
Qualificationsnon-profit business, philanthropic causeInteresting good or service to offer as perksMaking a ProfitMust be a businessGenerate Revenues
Investor Restrictions
NoneNoneAccredited Investor for business lendingAccredited Investors OnlyAccredited Investors Only
Best ForNon-profits, Philanthrophic projectsPre-sale items, Projects with a large crowdMust have cash-flows and collateral, seeking lower interest + faster approval than bankGrowing companies, Exit strategy in mindNo bankruptcy risks, No equity loss, Pay only when you make money
StatsAverage Amount Raised $1,400, Industry Size $1.4 Billion in 2013Average Amount Raised $2,300, Industry Size $1.3 Billion, More than 50% fail to reach goalAverage Raised $4,700, Industry Size $2.1 BillionAverage Raised $190,000,
Top Platformsgofundme | Youcaring | WeDidItKickstarter | RocketHub | IndiegogoLending Club | Prosper | Funding CommunityAngelList | CircleUp | SeedinvestBolstr | Pave
All PlatformsList of Donation PlatformsList of Reward PlatformsList of Debt PlatformsList of Equity PlatformsList of Royalty Platforms