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Crowdfunding - 2013's Source of Financing Part 1

Crowdfunding - 2013's Source of Financing Part 1

Most likely, you’ve participated in some form of crowdfunding before, such as disaster relief campaigns or other donations that aided for a purpose. Usually it’s a story that moved you, where suddenly you felt compelled to contribute in some way, whether it was monetary value, or shared with friends.

How did it make you feel when you contributed? There’s a sense of self-satisfaction that you “did good” in helping another less fortunate right?  It’s that power of collective effort that makes you believe in humanity again when everyone bands together.

Now, let’s say that you can harness the power of crowdfunding for your startup, small business, or project. What if you can get funding via the public instead of applying for a bank loan or worrying about your credit score? A recent webinar hosted by SCORE, went over the basics of crowdfunding which I’ll summarize in a 2-part article.

4 Types of Crowdfunding:

Reward-Based: Contributors will get some sort of tangible item if your end goal is met. Product-based startups will typically use this type to get early versions of the product to “early bird” donators and can also be considered as a “pre-sale.”

Donation-Based: Contributors will get some sort of acknowledgement, appreciate or other items of value to note their donation. Creative projects like film making or non-profit organizations typically use this type.

Equity-Based: Contributors become investors and receive stocks within the company. Small businesses and startups will benefit from this type as it increases potential investors in your company.

Lending-Based: Investors provide loan capital to the entrepreneur where money will be returned in full with interest at a later date. This type is for established companies (at least 1 year) and has current customers and cash flow to repay the debt.

Sample Crowdfunding Platforms to Choose from:

Reward/Donation: Indiegogo, Kickstarter
Equity: CircleUp, SeedInvest, Fundable
Lending: SoMoLend, Prosper, Lending Club

Why People Contribute

- You told a compelling story and they want to believe in you
- They’re interested in the rewards and perks for contributing
- They want to have a sense of pride and participation
- They want to have a stake in your company

Stand Out from other Campaigns

- Have a compelling name
- Have a compelling description
- Have clear and story-telling imagery
- Have a video

By having a video, you’re 114% more likely to reach your goal and if you include imagery, you’ll be 5x more likely to reach your goal as it creates validity that you’re a real person, with a real project.

This concludes Part 1! We’ll continue Part 2 tomorrow focusing on Equity/Lending-Based crowdfunding in addition to providing more tips on how to make your campaign successful.

Have you participated or started a crowdfunding campaing before? What did you think? Feel free to comment below!

+Alice Ly
Social Media Manager
Lucrazon Ecommerce

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