What is Crowdfunding? Reward, equity and donation crowdfunding.
What is Crowdfunding? This is a question being asked by millions of individuals as the industry grows larger with each passing second. Crowdfunding is an alternative way to gain funding in order to help grow your fledgling business or develop your investment portfolio.
Crowdfunding rewards you with the opportunity to reach millions of potential investors, defying the convention of asking a few people for huge sums of money. Instead, you can seek out a large number of small, low-risk investors.
In times past, If the bank rejected your business loan, it was game over for your business. Crowdfunding allows you to publicise your innovative ideas to the world, putting you in touch with the people who truly believe in them.
There are three different types of crowdfunding: Donation based campaigns, Reward based campaigns and Equity based campaigns.
What is Crowdfunding – Donation based campaigns:
These campaigns exist to help charity projects find their funding. They offer no financial reward for the investor other than the satisfaction of donating to a worthy cause.
Just Giving & GoFundMe are the two largest donation campaign platforms. A typical campaign include photos and videos describing their cause, and a detailed portrayal of how the funding will be used, so investors can see how their investments affect people’s lives.
Jambus is a great example of a donation campaign that we’ve supported. When Ed Sheeran donated a bendy bus to Ecclesbourne Primary School, they saw it as an opportunity to teach music skills to children that needed it. So, they converted it into a classroom and held a campaign to raise funds for improvements. With Ed Sheeran’s support, they were featured by the BBC and The Metro.
View the full campaign here: drop.studio/project/ed-sheeran
What is Crowdfunding – Reward based campaigns & types of crowdfunding rewards:
This type of campaign promises rewards in exchange for different levels of investment. Typically, the larger the pledge, the more valuable the reward. This can act like a pre-order system, where the backer receives their reward by a pre-agreed date.
Unique crowdfunding rewards like limited editions, tours, networking sessions and prototypes are usually offered as a way of compensating for the risk of early investment.
Indiegogo and Kickstarter are the two largest rewards-based crowdfunding platforms. Kickstarter has many more visitors, delivers your investment at the end of a successful campaign, and has a maximum reward-tier value of £8,000 Indiegogo has no such cap, but has better customer support and can release funds to you even if you don’t reach your funding goal.
Because you’ll be appealing directly to customers, you should take an original and entertaining approach that focuses on your product or service. Here’s an example of a great rewards-based campaign titled ‘Pulp. Wine Made Easy’
View the full campaign here: http://drop.studio/project/pulp-indiegogo
Pulp saw a market of potential wine lovers who didn’t understand what they were looking for. Their solution was to create an algorithm that distinguishes your personal taste and delivers the recommended wines to your door. With a fantastic pitch video, a social media presence and a great selection of crowdfunding rewards, they were able to get fully funded in a single day on IndieGoGo
What is Crowdfunding – Equity based campaigns:
Instead of rewards, these campaigns offer investors equity (a share) in your business.
This is a great approach for companies that have large funding goals, allowing you to generate anything from £50,000 to £1,000,000+. Where previously only the wealthy could invest in startups, crowdfunding encourages lots of investors to buy small slices of the pie.
The most notable websites for creating equity campaigns are Crowdcube, Seedrs and Crowdfunder. There are a great many small differences between these, and we recommend that you research all the options to see what suits your needs.
Core Collective used the equity-based crowdfunding platform, Seedrs, to meet their ambitious business goal. They did this by providing detailed insights into the fitness industry and how their pay-as-you-go gym platform would improve it. With a great pitch video, booming social media presence and a thorough outline of past accomplishments, they raised over £2,000,000 – well above their goal of £1,125,000.
View their full campaign here: http://drop.studio/project/core-collective
Crowdfunding is growing rapidly, so whether you want to receive an investment or make one, now is a great time to get involved. Crowdfunding isn’t just based in the UK, it is a worldwide phenomenon so wherever you are in the world, you’ll have a platform to operate.
So, crowdfunding could open that door that was slammed closed by the bank. It gives you the creative freedom to share your business with a planet of people who believe in your idea and want to see it flourish.
Do you need crowdfunding support?
We can help. Drop The Crowdfunding Studio are proud partners of Crowdcube and Indiegogo. We assist ambitious businesses in communicating their ideas, products and services with outstanding crowdfunding video production, campaign design, crowdfunding marketing and crowdfunding PR.
To learn more about us and our services, visit our website: drop.studio
Or book a free phone workshop today and ask us anything, like how to create a successful crowdfunding campaign or how to accelerate your business from zero to fully funded.
Want to find out if your product is right for crowdfunding? See our next article.