What is crowdfunding? How does it work?
Crowdfunding is a fairly new concept that involves small or large sum contributions or investments by a large number of individuals into a new product or idea. The concept also involves an inherent promise that investors will get first access to the product after it has been fructified. Ideas for crowdfunding can be anything from a novel gift-item, a new video game idea, to some advanced tech gadget. The main aspects of any crowdfunding project are ensuring that people get convinced about the idea enough to invest some amount in it for future rewards, increase their engagement in the project, and get them to share the crowdfunding idea with others so that the special product sees the light of day with increased funding.
Crowdfunding has some challenges of its own. There is partial regulation of the industry and there are continuous discussions between regulators and founders of crowdfunding industry to establish some kind of balance between protection of investors’ money and permitting freedom and creativity to thrive for the venture to become successful. Protection of investor funds is essential as a lot of ideas and small ventures tend to flop and lose money in the beginning.
How to start a crowdfunding plan?
Listed below are some steps that you need to take to launch a crowdfunding project.
Select a crowdfunding platform
There are many platforms such as Kickstarter, Indiegogo, Patreon, GoFundMe, Crowdrise, PledgeMusic, Razoo, RocketHub, Give, Crowdcube, and Crowdfunder, etc. where you can start crowdfunding. Select the platform that is ideal for your idea/project.
Ensure that rewards are good
Good rewards, as per the amount of investment, will ensure that it attracts more investors. A ‘thank you’ is not adequate, even if the contribution is $1. There should be some kind of reward, such as discounts, earlier access to service or product, additional freebies, etc.
The idea has to be tempting
The idea has to be unique and stand out from others so as to attract an increased number of people. You can put up videos, vivid imagery, or a great but short sales pitch, etc. Also, ensure that the crowdfunding plan can be easily shared by people with others through different media.
Keep different stages of investment
Some investors may contribute small sums while others may invest large sums if they find the idea worth investing. Hence, keep varying investment levels.
Spread the word around
It is important for you to inform others of the crowdfunding idea else they will remain unaware about it and not make any investment. You can use social networking sites and other means to advertise the idea and get people talking about it. It is also important for you to keep posting updates about the progress of the idea so as to assure that their money is in good hands. Posting updates will also cause the initial investors to talk about the idea (their investment) with others and thus becoming an additional marketing resource.
Not all crowdfunding projects are successful. But there have been great success stories as well. Pebble Time – Awesome Smartwatch raised over $20,000,000 via crowdfunding on Kickstarter.