How to Raise Capital for Your Business Idea Through Crowdfunding

Starting up in business can be frustrating and this has made many startups close down their services because of lack of finance to fund their business.

However, crowdfunding has become one of the ways many people get funds and invest back into their business. Are you starting your business? Do you want to know more about crowdfunding? 

This article will guide you on how you can raise capital for your business idea through crowdfunding. Read on to gain access to that cash you have been longing for.

What Is Crowdfunding?

Crowdfunding is the process where people go to ask a large audience to invest in their startup which mostly happens in financial issues. 

Entrepreneurs use crowdfunding platforms or host websites to ask for funds through friend's, family, and even the general public. 

For example, if someone wants to open a shop where they sell agro chemicals, he/she goes to a crowdfunding website and records themselves explaining reasons why they want to go into that business and after that they go on to launch the campaign.

Types of Crowdfunding 

With every crowdfunding campaign, you will receive contributions from individuals to help you attain your financial objective. But, the sort of crowdfunding you choose may have an influence on the amount you owe donors and the campaign's expenses. Below are types of crowdfunding you may be interested in:

Donation

In the previous illustration of crowdfunding, the money was raised via the collection of donations. You start a campaign and solicit financial support from other individuals. If you accomplish what you set out to do, you owe them nothing, and the individuals who help you did so without expecting anything in return.

Rewards

Crowdfunding campaigns focused on prizes are one way to increase donations. Donors provide funding for your business venture if they stand to gain from doing so. Donors to many businesses are given early access to products or limited time free trials of services.

 Equity

Although other forms of crowdfunding avoid diluting shareholder ownership, you could run an equity-based crowdfunding campaign. Rather than expecting a tangible, one time reward, people donate to receive ownership in your startup.

Giving ownership to a group of investors also broadens your network, as these donors will have a greater stake in the success of your business.

Debt

Debt-based crowdfunding refers to the practice of obtaining loans from a group of individuals rather than getting contributions. You are going to be required to pay them back, and there will be interest added on top of that. But, because of the flexibility of crowdfunding, it is possible to gather financial resources more quickly than by obtaining a commercial loan from a bank.

How To Start Crowdfunding

On average, it takes eleven days to put up a successful crowdfunding campaign. I'll be showing you a couple of step to kickoff a successful crowdfunding.

1. Check Rules and Regulations

Platforms for crowdsourcing financing often adhere to certain guidelines. For instance, false or manipulated prototype videos or photos are not allowed on Kickstarter. Crowdfunding contributions are limited to $5 million per year per individual, under SEC rules.

To learn the constraints of crowdfunding, see the official SEC rules.

2. Create Engaging Videos

The amount of money raised by crowdfunding campaigns that include videos is more than twice as much as that raised by campaigns that do not include videos. The issue, your solution to the problem, your development as a company, and the size of the market should all be included in the videos.

To get started, you should begin by writing a script while keeping your audience in mind. Simplify your product, for example, if it contains a lot of technical components that are difficult to understand. In order to make your business more accessible to prospective donors, break it down into language they can comprehend.

When the script has been finalized, the next step is to find a capable filmmaker who can produce an engaging video. It is best to avoid utilizing the camera on your laptop if you want the video to look professional.

3. Communicate With Your Community

Inform any people who have signed to an email list or who follow you on social media about your plans to crowdfund, as well as the prizes that you want to give in exchange for donations (i.e., product, equity, etc.).

Ask your followers for comments, including what they would want to get as a result of investing in your company, before you begin your campaign.

4. Identify a Platform

While you could run a crowdfunding campaign on your own, doing so via a third-party platform offers a great number of advantages. Some platforms already have traffic flowing through the site, and visitors may investigate subjects that they are particularly interested in.

5. Launch the Campaign

Launch and spread the word about the campaign as soon as you have decided on the text, the video, and your audience. Share it on your social media accounts. Spread the word to your close friends and relatives. Email your subscription list. Your ability to spread the word about your campaign to a wider audience will increase the likelihood that you will meet your target number of donations.

Types of Crowdfunding Platforms

Below are a couple of crowdfunding platforms that will help you through the process of starting your campaign.

• Kickstarter: Specializes in rewards-based crowdfunding for creative ventures, including arts, food, music, and more.

• Indiegogo: Caters to innovations in design and tech, with both donations-based and rewards-based campaigns available.

• SeedInvest: Provides equity-based crowdfunding for a selected group of startups.

• Funding Circle: Matches businesses to institutional investors for debt-based campaigns.

• Wefunder: Specializes in equity-based crowdfunding for startups.

• Fundable: Serves small businesses across all industries.