If you’ve scrolled through your social media feeds lately, you’ve most likely seen at least one business trying to raise seed money or secure funding for development of a product. The trend is called crowdfunding, and it’s changing the way startups enter the marketplace.
Crowdfunding is a strategy used by small businesses and startups to move from conception to inception. In the past, entrepreneurs were at the mercy of loan officers or had to hustle to find angel investors to raise venture capital, but with crowdfunding, the traditional barriers to raising funds have been brought crashing down.
There are reportedly over 600 crowdsourcing platforms to choose from, and with the full power of the Internet behind them, they each allow entrepreneurs across the globe to tap into the pocketbooks and support system of “investors” worldwide. It was reported that in 2015, roughly $34 billion was raised globally through crowdfunding, and the numbers have only increased since then.
Crowdfunding platforms can be viewed as a type of social media and campaigns are often proliferated via other genuine social media platforms. There is a general flow to how crowdfunding operates, and it begins with an entrepreneur or business owner who has an innovative idea. Our entrepreneur takes that idea to a site like Kickstarter and creates a call to action for people to donate or lend money toward getting his business off the ground.
Our clever mogul-in-the-making then shares that call to action across several of the largest social media platforms (Facebook, Twitter, LinkedIn, etc.). Not only do our entrepreneur’s family, friends, and followers see his call to action, but they can share it too. Additionally, on platforms like Facebook, our go-getting entrepreneur can conduct some amateur marketing by creating ads to promote his campaign to a specifically targeted audience.
So, now you’ve got the gist of how crowdfunding works, but which platforms should entrepreneurs use for the best results? The following list includes some of the most reputable crowdfunding sites, but it is not an exhaustive list. Searching online forums and asking other entrepreneurs about their crowdfunding experiences is the single best way to find the platform that best meets your startup’s needs.
Kickstarter – Easily one of the most widely recognized platforms in the game
Angel List – One of the oldest and most established platforms
CircleUp – Their tagline sums them up: “Access to Quality Investors + Tools & Analytics = Fundraising Results”
EquityNet – Likes to call themselves the “original” crowdfunding platform
Wefunder.com – Allows backers to invest with smaller denominations as low as $100 which allows a for a wider range of investors (many other platforms insist on $1,000 minimum investment)
By affording everyday citizens an opportunity to fund a business by investing their money into it in exchange for stock options (a.k.a. equity crowdfunding) or first run products, those backers develop a sense of ownership. They have a personal interest in seeing your business succeed. Because of that, they will share your campaign with their friends and loved ones to further your chances of reaching funding goals.
Crowdfunding allows entrepreneurs to put their business in front of a much larger audience of potential investors and streamlines the backing process for those interested in investing in the startup. Which ultimately results in a much more smooth, timely, and less costly means of acquiring capital for launch and an expedited ability to present products and services to the marketplace.
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