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Crowdfunding: In the past, there were several ways to raise money for a project, a business, or anything else that needed money to get started. Could borrow money and get into debt. They could get money from friends, family, angel investors, or venture capitalists. They could even fund the project by scraping together as much money.
In the late 2000s, crowdfunding became a fourth option for people who wanted to get something started. Crowdfunding is a way to get a lot of people to donate money. Large groups of people pool their small investments to give a business or project the money it needs to get off the ground. Anyone can donate to a campaign, which can be started by an individual, a charity, or a business.
Businesses, like other groups, can use crowdfunding to raise money for their projects. When we talk about crowdfunding in business, we usually think of new businesses, angel investments, and deals that don’t go through banks. Simply put, crowdfunding for business is a great way for startups to find investors quickly from a large group.
People can invest with just a few clicks on platforms like Republic. These people are often called “backers.” Most crowdfunding campaigns have a clear goal and give investors something in return for their money. Most of the time, backers of a campaign benefit if the goal is met. In the future, if the company is sold or goes public for the first time, backers can get cash or stock.
In crowdfunding, many investors are asked to take part and invest their own money. This is a big change from how companies and institutions usually raise money by going to a few big investors. Crowdfunding is mostly done online, while most other ways of getting money are done in person.
Crowdfunding is good for a lot more than just getting money. Most new businesses have a hard time getting money to start up. VCs don’t invest in many early-stage companies for various reasons, and getting cash from banks or rich relatives is not a good idea. Crowdfunding levels the playing field because it makes people less reliant on old, sometimes only ways to raise money.
Crowdfunding campaigns are also distinctive in that they can get new users interested and get them to take action. Campaigns are a great way to spread the word about a company, brand, product, or service because they require people to participate.
The campaign goal and timeline make investors feel they need to act quickly. So, crowdfunding allows startups to get the word out and find early adopters. Startups can get in touch with potential customers, who could also be investors and promoters of the brand.
A successful campaign shows that people are interested in a product and gives new projects the time they need to get off the ground. From the point of view of an investor, crowdfunding is a simple way to give money to projects and people you care about. Crowdfunding also lets investors put small amounts of money into many different projects.
This spreads out their investments and increases their chances of getting a big return. Crowdfunding is a high-risk investment, so investors should only put in money they can afford to lose. However, in theory, all an investor needs are one big hit to make up for other losses and get a big return.
From the point of view of a business, crowdfunding can be a great way to get money fast. Even though it takes a lot of work, promotion, and attention for a crowdfunding campaign to be successful, over 90% of startups on Republic have been able to raise money.
Even though success is never assured, platforms like Republic use all the tools they have to help each campaign get more attention. From an investor’s point of view, crowdfunding has its risks, just like other ways to put money into something.
For one thing, investors could lose all of their money. Even if a company reaches its crowdfunding campaign goal, that doesn’t mean it will be successful. Most new businesses fail; if an investor puts money into a business that fails, they will likely lose all of their money. Even if a business is successful, it could be years before it starts making money.
Crowdfunding campaigns always come with some risks. Investors should check out any project they want to put money into to ensure their money will go to a good company or cause. With the growth of the private investment market, it’s important to note that startups looking to invest in platforms like Republic have built-in teams to reduce the risks of the private market.
Even though these companies are not nearly as closely regulated and watched as public companies, fraud prevention and other safeguards are in place to ensure that accurate information is available. So, investors can make decisions based on facts.
How can someone make the most of the next chance to raise money through crowdfunding?
As one of the most popular places where people can support new ideas, Kickstarter is almost the same as crowdfunding. Since it started in 2009. The Kickstarter community has helped fund more than 156,000 projects, including physical products, movies, games, and more, for a total of $4.1 billion.
Kickstarter is a way to raise money by giving people rewards. Backers are given things like T-shirts, shoutouts, and exclusive pre-order discounts in exchange for their help with the project. You can offer various levels of rewards. The more money a backer pledges, the better rewards they can get.
All-or-nothing is how Kickstarter campaigns work. Which means that you can only get your money if you reach your initial goal. If you don’t get enough money, all the money stays with the people who gave it to you. Because of this, projects on Kickstarter tend to be high quality and unique. They are often creative or innovative enough to get the attention of early adopters and make headlines in the press.
Backers also tend to trust these projects more because they don’t have to give up their money until a successful campaign. You can learn more about how to run a successful Kickstarter campaign from our interview with Rockwell Razors. And if you want to move from your Kickstarter campaign to a Shopify store, we can help you do that.
Indiegogo is a strong platform for crowdfunding that helps businesses, artists, and charities. At first glance, it may sound like Kickstarter, but it has its features and ways to run a campaign. The most important difference is that you can choose whether your campaign has a fixed or flexible funding goal.
When you have flexible funding goals, you get your money whether or not you reach your goal by the deadline. The flexible funding option is especially helpful when you can keep your promise to backers even if you don’t raise enough money, like when launching a new product line for an existing business.
Indiegogo InDemand also lets you keep raising money after your crowdfunding campaign is over while making the product or getting ready to fill orders. Whether you run your campaign on Indiegogo or another crowdfunding site, you can use InDemand.
BodyBoss moved right away from Kickstarter to Indiegogo InDemand after their success there. Startups in the U.S. might also look into the equity crowdfunding option on Indiegogo, where you can submit your campaign to investors on the site who want to invest in your business.
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Patreon is one of the unique platforms on this list because it focuses on the new wave of creators like bloggers, YouTubers, podcasters, cartoonists, musicians, live streamers, and others like them. Many of the best crowdfunding sites support limited-run campaigns.
Still, Patreon was made so creators and internet personalities with loyal fans could get paid memberships and make monthly money. Patrons can pay monthly for special community benefits or per creation to encourage you to make more. Creators on Patreon offer different levels of supporter rewards, such as exclusive content, branded merchandise, sneak peeks, shoutouts, and more.
If you put out new content often and have many online fans, you might want to make a Patreon page. Here, you can build a community of loyal fans and give them access to exclusive content based on their membership level through Patreon’s different integrations.
The Crowdfunder app for Shopify is perfect if you already have a Shopify store and want to crowdfund a new product through your website. With this app, you can turn your product page into a crowdfunding page with a progress bar. You can set your goal based on how many items are ordered or how much money is raised.
It lets people do the simplest crowdfunding: to take pre-orders from people as a way to test an idea and get money to make it. You can also avoid the commissions charged by third-party platforms and pay a more stable monthly fee instead. You can use it to try out new product ideas, raise money for a good cause, or release products that are only available for a short time.
GoFundMe is a free platform for crowdfunding that is mostly used to help people and causes. It is good for personal causes, and anyone can start a campaign. Because of this, backers tend only to support campaigns from their networks or communities or for causes they already know about.
Like the other sites on this list, GoFundMe isn’t made for commercial crowdfunding campaigns. But if you’re a small business owner who has fallen on hard times or needs money to help you get through a personal problem, you can use this platform to get help from your network.