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Is your business a good fit for crowd funding?

January 29th, 2014 by

business fundingTraditionally, business funding has be accomplished through a few well-established paths. You dip into your savings, get a loan or attract the attention of venture capital investors. But, instant online payments and a few ambitious websites have brought an increasingly common route to raising seed money, crowdfunding.

In a crowdfunding scenario, entrepreneurs get projects off the ground by gathering seed money from donors. In almost all cases, the donors will get token rewards for their contributions like t-shirts and product samples. There are only limited opportunities for donors to become investors with shares in the company, but, pending legislation may change that within the next year.

Is A Kickstarter Right to Get Your Business Revving?

Kickstarters only allow discrete product launches, not company start-ups. So, you can run a kickstarter for your new videogame, but not to launch your own videogame company. Funding campaigns are winner takes all; if you don’t meet your goal, you don’t get the money, making it a risky investment.

Typically, projects that are B2C will work better than those that are B2B. Part of that is the simple fact that there are more people who are potential end customers in their personal lives than there are decision-makers spending company dollars. Even though people are giving donations, in the end, the core question in good marketing still applies: pretend you are the customer and ask “what’s in it for me?”

A Crowd of Funding Sites

Kickstarter is the largest crowdfunding site; in fact, many experts in the field say that you should only go for one of its competitors if your project, for some reason, does not fit Kickstarter’s requirements. But, there are some upsides to other crowdfunding sites’ models. For instance, Indiegogo allows you to collect whether you hit your goal or not, which means that you will still get something to start with. Crowdfunder specifically focuses on launching businesses instead of individual products, and might be a better fit for the B2B crowd. Crowdrise is the place to go if you want funds to start a non-profit. There are dozens of options beyond Kickstarter that should be considered before you just jump onto the best-known option.

Tips for Crowd Funding Success

The most important ingredient in a successful crowdfunding campaign is supporter excitement. Your campaign needs to speak to people. While the product itself is, of course, at the crux of this, how you present your campaign matters, too. The text of your campaign page should not just be a set of technical specs, but a narrative that draws people in and gets them excited. You need quality photos and a persuasive, share worthy video. If you can get people as passionate about your product as you are, you can achieve the momentum to take your business funding campaign to success.

Lara S is a freelance writer available on WriterAccess, a marketplace where clients and expert writers connect for assignments.

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