A Beginner's Guide to Crowdfunding
What Is It?
Crowdfunding is a way of raising finance by asking a large number of people to each donate a small sum of money.
It inverts traditional financing, which usually involves asking a few people for large sums of money.
It is used to fund a wide range of business start-ups, artistic projects and community-based social ventures.
How Does It Work?
- A project initiator proposes the idea
It could be a product, an art project or a social venture.
A funding target to achieve the idea is announced.
- Individuals or Groups Support the Idea
It starts with the proposer’s network and spreads out to the wider population as word gets around.
- A Moderating Organisation (or ‘Platform’) Brings Them Together
When the target is reached, the project is launched and the supporters become shareholders.
What Can It Achieve?
The estimated global fundraising volume from crowdfunding in 2015: £22 billion
The First: 1997
Online crowdfunding is thought to have started when rock band Marillion raised over £50,000 to tour the US.
The Largest: £138,000,000
Raised for The DAO(Decentralized Autonomous Organization), a virtual venture capital firm.
The Fastest: £1,000,000
Raised by Monzo Bank in 96 seconds using the Crowdcube platform.
Tips for Doing Your Own Crowdfunding Project
- Select an online crowdfunding platform to match your budget, your niche and the level of support required.
- Pitch a compelling story, preferably using video, to spark and build interest.
- Avoid a cold launch by getting support from your family, friends and network.
- Keep it personal by communicating regularly through social media.
To discover more reasons why small businesses should be optimistic, click here.
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