Have a business idea but are stuck for funding? Heard of crowdfunding but think it’s something only to be used for creative projects? It’s time to consider crowdfunding as a viable option for raising startup capital.
How does crowdfunding work?
Crowdfunding is the art of raising funds for a goal by lots of people donating different amounts towards a target in a set amount of time. Donors’ money is exchanged only if a target is met. Project creators often give donors different ‘rewards’ (from a thank you card to being invited to a VIP event and beyond) depending on the amount donated.
Why crowdfund your startup instead of getting funds from an investor?
- You’ll build a huge network of supporters.
- Typically, if you get a loan or a lump sum investment you’ll only have a small pool of people supporting your venture. If you successfully crowdfund, potentially hundreds of people will have donated to you. Having contributed to your vision, donors will often be keen to keep on supporting you as your business grows.
- Plus, you can continue sending donors updates after your project has finished which can be super useful to feedback to them and get their support and input in the months after your crowdfunding campaign.
You don’t have to give up equity
Unlike other forms of funding you don’t have to give up any equity to donors (unless you want to of course! See crowdcube.com for equity based crowdfunding). You can encourage people to support your startup by offering rewards depending on the amount raised. E.g for £10 donations, you could offer a free trial of your product or for £1000 donations offer free use of your product for a year (or even for life!).
Bar standard PayPal/Stripe fees of around 3%, projects funded on the crowdfunding platform hubbub.net are free to set up and funds go directly to you.
Matchfunding: If you’re lucky enough to have already been offered a sum of money by a company or individual you can utilize this with crowdfunding. If a grant funder, company or individual offers you £1000, you can have a banner on your crowdfunding page on hubbub.net explaining that the organization or person is matchfunding the first £1000 of every donation. Every time someone donates on your page, the amount will be doubled. This is great promotion for the matchfunder and also great for building momentum on your crowdfunding page!
SPiKL, an intra-university language exchange programme was crowdfunded by a student at York University: https://yustart.hubbub.net/p/yuspeak-spikl/. Evelyn needed £800 to fund a platform that matches native language speakers. She overfunded and raised £1,004 from 47 donors who will continue to support her as the platform grows.
Mizzen+May raised $54,568 on Kickstarter from 153 donors to bring their performance clothing brand to life: https://www.kickstarter.com/projects/mizzenandmain/the-performance-blazer-tradition-evolved/description
Crowdfunding is an upcoming, viable alternative to gain funds for a startup. Yes, it’s super hard work but the benefits of having a long standing network behind you that you can contact means you can reap the long-term benefits.
You can start a crowdfunding project today for free with hubbub here: https://hubbub.org/projects/create/
Christina x (get in touch at firstname.lastname@example.org with any crowdfunding questions!)
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