A Pro’s Guide to Crowdfunding for Business
There are few pursuits more closely aligned with the American dream than opening your own business.
It’s both a way of earning a livelihood and a way of expressing your own individuality.
Besides, why work for someone when you can work for yourself?
In this new age of technology, starting a business is a different process than it used to be.
There are many new avenues, one of the most popular being crowdfunding.
Crowdfunding for business, because it’s so new, can be uncharted waters for entrepreneurs. So here’s a guide that includes everything you need to know.
Which Businesses are Most Likely to Have Success with Crowdfunding?
Not every business is conducive to crowdfunding. If you’re looking to open a dry cleaning business or an auto shop. There’s not a large crowdfunding network to draw upon. Crowdfunding tends to work best for independently owned businesses. That offer a specific, unique, easily communicable service or product that doesn’t yet exist.
Here are some business types are most likely to succeed via crowdfunding.
Whether you’re an independent writer. A content creator on YouTube or you’re looking to star a podcast, crowdfunding can be an incredibly useful tool. This is partly because no matter the subject of your book, channel or podcast. There is likely to be many other like-minded folks out there who are starved for content. Willing to pay for it, no matter how niche the subject. For instance, one creator on Patreon is able to make a decent income by creating hand-drawn maps. For table top role-playing games. Some people have huge backings simply because they watch videos and film themselves reacting to them.
If anything is true about modern culture, it’s that we not only love technology, but we rely upon it. Therefore, it should come as no surprise that gadgets are among the most widely crowdfunded projects. Some of the most popular gadgets are the Pono, an alternative to the iPod that provides higher quality audio. There’s also the Pimax, which has almost 6,000 backers and claims to be world’s first 8K VR headset. There’s even a firepit that claims to produce fire with no smoke, which has over 10,000 backers. Why wait for big dogs like Apple and Google to propel us into future when you can do yourself?
There are certain sites like Indiegogo that can give local businesses a nice boost. Because they offer local services. They might not bring in as much money as a gadget or a YouTube channel. There is money to be made here. For instance, a restaurant in East Los Angeles has raised over $22,000. So far, in its mission to offer the area plant-based foods and drinks. Meanwhile, a pop-up creamery in San Francisco has accumulated over $9,000 in its mission to settle down. Open a brick and mortar location. Even such business such as a kid-specific bookstore in Georgia has gathered over $9,000.
Which Crowdfunding Site is for You?
There are many different crowdfunding websites to take advantage if you’re looking to boost or start your business venture. However, not all of the sites are equally conducive to all different business types. For instance, one site might specialize in creative endeavors, while another site might cater to local businesses. To eliminate any confusion, here’s a list of some of the most popular sites for crowdfunding for business. The business to which they’re most helpful.
Patreon is one of the most famous crowdfunding sites. Partially because it caters to creatives. This means that if you enjoy a particular podcast or YouTube channel. They’re likely to have a page on Patreon that allow their fans to fund their work. This is great for creators, because creative work doesn’t often pay the best. As you’re unlikely to find a steady job as a creative writer or an artist. So, whether you specialize in pastel drawing of “Game of Thrones” characters. You are looking to start a podcast about folk music or you make clay sculptures of the presidents. Patreon is the place for you.
Founded in 2008, Indiegogo is actually the largest crowdfunding site. As they’ve had campaigns started in 235 countries and territories. In fact, the projects on its site have gathered a grand total of over one-billion dollars combined. This is partly because the site offers funding for a wide variety of projects, unlike the specificity of Patreon. Whether it’s technology, creative works or local community projects. Indiegogo might be the home of your crowdfunding campaign. Some of the most successful businesses and products to be featured on the site are a pocket translator. A series of gourmet spirits and the directorial debut of the actor, Graham McTavish. In other words, Indiegogo has opportunity to go around.
Like Patreon, Kickstarter specializes in creative work, which includes films, music and video games, as well as technology. Many consumers are attracted to Kickstarter because it offers rewards to those who donate money. To get a sense of what has the most success on Kickstarter. The top five successes are Pebble Time (a smart watch). Coolest Cooler (a cooler that has a speaker and a blender built into it, among other things). And Kingdom Death: Monster (a cooperative board game). Creatives aren’t the only people who can use Kickstarter. As they also offer a platform for hand-crafted clothing and specialty foods, among other things.
Unlike the other listed options, Equity Eats is made solely with restaurants in mind. According to Forbes’ Maureen Farrell, restaurants are among the riskiest businesses to start. This is why crowdfunding is such a desirable option. Not only do you gather money, but you gather a reputation. Which is one of the most difficult tasks for up-and-coming restaurateurs. While FoodStart is a much smaller operation, it’s one of few restaurant-specific crowdfunding sites since EquityEats became InKind.
If your operation is very small and very local, GoFundMe might be the way to go. This is because the website specializes in personal issues and charitable causes. Nonetheless, the crowdfunding site does have its share of small businesses. Such as food trucks, independent book stores and even yarn stores. Because most people who donate on GoFundMe are looking for charitable causes. So if your business is a success story waiting to happen, GoFundMe is prime real estate.
How Can You Make Sure People Donate?
When crowdfunding for business, service or product needs to be unique. It needs to offer the public something they didn’t know they wanted. Or something they wanted but didn’t have access to. If you decide to crowdfund a book about George Washington’s life, you’re not likely to hook many patrons. But if you take a different angle to George Washington, such as his relationship with his wife, Martha. Or the direct comparisons between him and other presidents, you’re more likely to carve out a following.
Many of the crowdfunding sites have a framework that offers those who donate rewards. With this in mind, you’ll want to have a bevy of interesting and alluring rewards. These will vary depending on the nature of your business. If you’re funding a local coffee shop, you might offer early access before the grand opening. Or if you’re looking to fund a film, you might offer a role as an extra.
Not only do people enjoy receiving rewards, but they enjoy being involved. Your relationship with those donating is extremely important. Because it will help color the perspective of donators who are on the fence. Always remains cordial, thankful and generous.
It also helps if you have a network of friends and family to get your project off the ground. If people see that a certain business already has a respectable number of backers. They’ll be more likely to check it out and throw some money its way.
Alternatively, if you don’t have any backers, people are less likely to bank on an unknown quantity. Outside of merely donating, your friends and family can also promote for you, and in the age of social media, promotion by individuals is more effective than ever. Without word-of-mouth, even businesses with the highest quality of offerings can sink.
You’ll also want to make sure you have a realistic goal. Not only do backers enjoy donating to projects that appeal directly to them, but there is an altruistic angle to their decision making that wants to help. If they see someone is nearing their goal, they’ll be more likely to donate. If your goal is too steep, it will always seem far away and is unlikely to attract the donators looking to become a part of a success story.
Lastly, it’s important that your product or business can actually be attained. You wouldn’t want to have to issue a refund to your thousands of backers simply because you were a little in over your head. Make sure you have a clear blueprint for your project before embarking on a crowdfunding campaign. Then, communicate his blueprint to the public, as it will inspire confidence in potential backers.
Featured Image: CC0 Public Domain via Canva, with text, banner, and logo added.