Today’s topic: 3 Best Crowdfunding Practices. Before kicking off a crowdfunding campaign, there are a few things you need to know. First, what is crowdfunding?
Crowdfunding is another way for entrepreneurs, creative thinkers, and non-profits to get funding. The goal is to pool together small amounts of money from a group of people that share your passion. These are people who believe in what you’re doing and want to see you succeed. Anyone can use fundraising without going to the banks.
It is possible to raise money without crowdfunding. But if you have a following it may come easier since you have a captive audience. Believers who are familiar with your product and goal. The fact is, anyone can go to a crowdfunding website, create an account, build a campaign and post it.
Be aware that some websites have requirements. For example, your project must be less than 60 days in length and there must be a review process. The guidelines may be strick and the money may not be paid out if you do not meet your goal.
Crowdfunding Best Practices
If you want to significantly increase your chance for success considers the following:
- Post a video
- Design a rewards campaign to increases the chance of reaching your goal
- Select the type of crowdfunding best for your project
Donation – The person investing receives nothing in return except possibly a tax receipt.
Rewards – The person investing receives a reward or perk in return for pledging a set amount of money.
Debt – Often called Peer-to-Peer (P2P) or Peer-to-Business Lending. The persona investing gives money in the form of a loan and receives interest in return.
Equity – The investor receives ownership in the company in return for their investment.
If you want to learn more about crowdfunding, consider the Small Business Administrations (SBA) training course. The course offers an overview of crowdfunding (also known as ‘crowd financing’ or ‘crowd-sourced capital’). You will find the course easy to follow and easy access. It will take about 30 minutes to complete the course.
You may also want to review the 12 Things You Need Know about Crowdfunding.
Looking for a Crowdfunding website
When you’re looking for a site to fundraise, check for fees as well as if it’s an all or nothing website. Many platforms will take processing fees from each contributing transaction as well as a small percentage of your overall earnings. Other sites will use an all or nothing model. This means you only get your money if you reach your intended goal.
Crowdfunding and the Law
Despite its benefits, crowdfunding poses legal, regulatory and ethical challenges. Those who raise money incorrectly could run into problems with securities laws. You need to learn before you leap, cross every ‘t’ and dot every ‘i’. Be aware that once it becomes obvious that a certain crowdfunding initiative is not going to succeed, crowdfunding platforms are supposed to pull the plug. Unfortunately, they are often slow to react. It is your responsibility to pay attention and insist on a shutdown. This is why legal assistance may come in handy.