Crowdfunding platforms are flooding the market with niche fundraisers seemingly open every day – so how do you choose the right one for raising money to back your idea or business?
Somewhere put there is a crowdfunder for everything – from tech start ups to personal good causes.
Choosing the right or wrong crowdfunding platform can make or ruin a project.
With the US Securities Exchange Commission greenlighting equity crowdfunding in the States, the market is about to become even more crowded as platforms jostle for market share.
If you are considering crowdfunding, the first decision is what sort of financial help are you looking for?
What type of crowdfunding?
Crowdfunding comes in three types –
- Donations – You persuade like-minded individuals to hand over a few pounds to support a project, which is generally a good cause
- Rewards – A favourite of the creatives out there and some companies who test the water for a new project by judging the response to their pitch. With reward crowdfunding, the more you give the more you get.
Rewards can range from a thank you on a web page, mugs, T-shirts or invitations to special events
- Equity – Donation and reward crowdfunding have one thing in common. Neither offer any real return for the money staked to a project. Equity crowdfunding is for businesses. Entrepreneurs offer shares in return for cash and a return on investment hopefully coming from the increasing value of your shares as the business grows
Some equity pitches are linked to the Seed Enterprise Investment Scheme (SEIS) or Enterprise Investment Scheme (EIS) and offer the opportunity of tax breaks
Working to a business plan
Once you have defined how you want to raise money, the next step is putting together a business plan and marketing plan. If you are seeking equity crowdfunding, any serious investor will want to crunch some numbers and see you are a serious business person.
Next comes the pitch. If you have a well-thought through business plan, then the pitch is easy.
Explain your idea, show how you intend to reach the goals set in your plan and format the information to best show-off your project on your chosen crowdfunding site.
Work hard on a short video and the graphics because you want to create some elbow room to set you out from the rest.