Raising Money

Things you should Know before opting for Crowd funding

There are new and emerging ways of start up business financing by which entrepreneurs can gain access to funding and raise business capital. One of the latest is crowd funding. But every method has its pros and cons and one should be aware of these before diving into the deep end. Here are some factors which can make or break your efforts to raise money through crowd funding.

What is Crowd funding?

Crowd sourcing is concept where businesses obtain services by asking for contributions from a crowd or large group of providers outside their business. In crowd funding the same concept is applied to fund raising and a venture or any new initiative is financed by the people or large groups. This is an ideal funding option for start up business financing as they get an opportunity to test products, get feedback and also gain a customer base, all at minimum or no cost.

The scope of crowd funding

Today there are more than 800 online platforms across the world and crowd funding has indeed become a very useful tool for financing start up business. If your product or idea appeals to the crowd and attracts their interest, if they think it is worth their while and find it is offering more than value for money, the scope or extent to which funding can pour in is limitless. But there are some pointers to keep in mind when opting for crowd funding.

Choose the right platform

Do not jump in without checking for the right platform. You need to find out which crowd funding platform meets your small business financing needs. Do not go by the success of others and approach platforms which are not suitable to you. Your campaign may be turn out to be a flop is every aspect.

Don’t ask for more funding than you need

When you venture to ask for crowd funding, do not start off with lofty goals. This will appear to the many prospective investors that your project is not attainable. If you have reasonably low and realistic goals, people with participate gladly. Choose a goal that shows you know your business and be completely transparent about your budget. It is likely that you won’t get a single shilling if you don’t’ hit your funding goals, so it is imperative to have your numbers right.

There’s no need to raise your whole project budget

If you are an SME which is into production you can run a different crowd funding campaign for each stage of your process which is unique. If you have been been successful in meeting your original fund raising goal, you can still raise more. It is common for most of the platforms to take a cut of the funds you raise, so make provision in your budget both for your project and the platform’s share.

Allow people to Participate-offer attractive rewards

You can gain a strong crowd of supporters if you allow them to participate and offer attractive rewards in the form of relevant packages that have real and creative value. Let them not feel like just contributors, involve them and they will feel that they have a personal stake in the project. Use incentives like Early Bird Offers and Limited edition rewards which will create a sense of urgency.

Entrepreneurial Learning

Crowd funding is a good option for start up business financing as long as you know what to do. Approach the right platform, set out a realistic budget, develop a strong campaign and keep constantly updated in social media. Offer rewards to elicit feeling of personal participation. Your project will take off with ease.

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