So, I hear you're trying to launch a startup or small business of your own? Well I know, as do you, how expensive that can be, so here is a comprehensive guide on a very popular method of getting funding for a startup: crowdfunding.

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Overview

Before you decide to get crowdfunding for your startup, you have to know why/if it is the best option for you. To help you make that choice a lot of this post will be devoted to explaining crowdfunding, the dos and don'ts, what crowdfunding is, and different types of it. If that sounds interesting to you, then let's dive in and learn how you can get crowdfunding for business!

What Crowdfunding is Not

First and foremost, crowdfunding is not for market testing your product. This is a very common mistake. Using crowdfunding to test your market reach can create an extremely dangerous situation, which can lead to legal troubles and financial stress. Why is this the case? Simply put, crowdfunding works by making promises on product delivery. If you do not currently have a firm grasp on the necessities required to start reaching your goal, then it will be difficult to fulfill those promises. If crowdfunding is used to carry out your market research it will be hard to meet your quota. Prior to crowdfunding your product, perform your own market research. Crowdfunding comes with a ticking clock.

Brennan White, a founder of a multi-million dollar social media agency, said, "Good investment is 20 percent money and 80 percent networking." In other words, learning to network is crucial to the success of your business!

Second, crowdfunding is not Venture Capitalist lite... Crowdfunding is not a substitute for institutional capital. If you want to learn how to get crowdfunding for business, you need to understand what differentiates it from venture capitalism. Venture Capitalists are investment firms that provide investment in exchange for equity. Meaning, as your business grows and gets more profits, the VCs get a share of those profits based on the equity they have earned through investing in your startup. Because of the potential profits they see, VCs can seem to scale your business unlimitedly (with strings attached of course). It's hard to scale your business with crowdfunding only.

When to Use Crowdfunding

When deciding how to go about crowdfunding for your business, consider it as a means to get early and loyal followers. Crowdfunding tends to elicit intense emotion and interest in the hearts of those that participate. For this very reason, crowdfunding for business can produce many die-hard fans. Not to mention, crowdfunding can double as marketing and media exposure!

For this very reason, learning how to get crowdfunding for business can lead to a much more successful return than traditional fundraising.

How to get crowdfunding for business

Types of Crowdfunding

There are two major types of crowdfunding for a business:

  • Investment Crowdfunding
  • Rewards and Donations Crowdfunding

Investment crowdfunding is promising equity in your company to those that participate. This is similar to, but NOT the same as Venture Capitalist. Venture capitalist tend to be a continual support sort of investor, where investment crowdfunding is a one-and-done sort of deal. Donation and rewards crowdfunding is simply selling at a highly discounted price, or donating the funded product to those that participate. This is the more common type of crowdfunding.

How to Get Crowdfunding For Business

Now that you know the dos and don'ts of crowdfunding how do you get crowdfunding for business? Well luckily for us entrepreneurs this is easier than ever! There are numerous websites for this very purpose. Note that all websites host different conditions and fees. Check out the list below.

  • Crowdfunder - Various plans starting at $299 a month
  • Patreon - You will pay a 5% fee. Typically used for bloggers, podcasts, and YouTubers
  • Kickstarter - You will pay a 5% fee if you meet your goal
  • GoFundMe - Free! Not designed for commercial crowdfunding campaigns however.
  • Crowdcube - You will pay a 7% fee if you meet your goal, and a 1.25% completion fee. CrowdCube has great benefits!
  • Fundable - $179 per month. Not percentage based.
  • Indiegogo - You will pay a 5% fee if you meet your goal

When you decide the best platform to use, create an ad that targets a specific group of people that would benefit from your project.

Crowdfunding often times will acquire payment processing fees. Check out this post to learn more about accepting card payments for your business!

Catch you on the flip,

-Noah

P.S. If you are wanting to, or have ever wanted to start a business, but are lost on where to start, click here and check this out