With the competition in the business industry getting more intense as technology advances and new ideas surface, entrepreneurs are seeking better and more creative ways to raise capital.
Fortunately, crowdfunding has opened the door to raise money in an efficient manner. Being mostly anchored on an Internet presence, however, this is not easy. In fact, crowdfunding has introduced an entirely new set of challenges for would be business owners. Here are some ways to get investors to notice your campaign.
KNOW THE DIFFERENCE BETWEEN FIXED AND FLEXIBLE FUNDING
Before you even try to get your hands into a crowdfunding campaign, this is one of the most fundamental facts that you should be aware of. Fixed funding requires campaigns to hit goals so that they can collect money. These are what are aptly called “all or nothing” sites. Flexible funding, on the other hand, lets you collect any amount that you are able to raise. Fundable and Kickstarter are some examples of fixed funding, while Razoo and Crowdrise are examples of flexible funding.
There are also some platforms like Rockethub and Indiegogo which allow you to choose between flexible or fixed campaigns. However, fees are higher with flexible funding. Make sure that you understand all kinds of fees when picking a site.
KEEP YOUR FOLLOWERS IN THE LOOP
Ice cream company Oppo offered an asking price when they were launching their campaign, but it did not feel right. Founder Charlie Thuillier says that he felt that the level of influence that was demanded could undermine his vision for the company, so he considered a more grassroots approach to raising funds.
Oppo was an almost instant success, but its crowdfunding campaign on the Seedrs platform was pretty slow. They say that keeping fans in the loop is their secret to success. They have been very careful to speak with people who love or hate them. They have also been actively engaging through social media or email.
MANAGE EXPECTATIONS WISELY
It goes without saying that most campaigns never hit their funding goals. Do not ignore the possibility of your campaign being among this majority. However, that does not mean that your eyes should be set on failure. You should seek alternative sources of capital even before you launch your campaign.
Crowdfunding is versatile enough to cover shortfalls from loans, credit cards and more. Entrepreneurs with credit card issues can turn to non-traditional choices, which include merchant loans, industry financing and factoring. Of course, crowdfunding has set the door open, but you need to be more creative to get a good response.
ALWAYS ASK FUNDERS FOR HELP, EVEN AFTER THE CAMPAIGN
Shoot, a platform designed for gardening, did not achieve quick results with crowdfunding. However, it was still ultimately a big success. It took the company two full weeks to raise 350,000 pounds on Crowdcube, and even overfunded and raised the maximum limit.
Founder Nicola Gammon says that crowdfunding was an easy choice for them, since they have a dedicated and passionate membership. She realized that if users of her platform were already committed to using it for big long-term projects, they would be interested in investing in the platform, as well. As to what she can advise potential crowdfunders, she says that funders should always be engaged. The relationship does not end right after the campaign. Most of their team hires come through their investor community and these are their biggest supporters.
FOLLOW THROUGH ON REPAYMENT
Companies have to make sure that each investor gets paid on time and in full. The goodwill of investors is also tested when terms are not fulfilled. This could risk being barred from a chosen platform or getting a low rating — and this could ward off a lot of potential investors.
You should be honest and determine how long it will take to strike gold when picking repayment. One possible tip would be that you could offer shares of ownership as an alternative if your project is still early in development, since it could be costly with interest payments.
Crowdfunding is not always the easy way out, but it could be the best for you depending on your situation. If you know how to use this to your advantage, then this could be a solid way for you to raise capital. What do you think of these tips? Share with us your thoughts in the comments below.