Top 6 Tips for Crowdfunding Your Startup

If you own or plan on starting your own business, you may have considered crowdfunding to raise additional capital. If you haven’t, you should.

It’s quickly becoming an extremely popular form of project and startup funding, primarily since it frees you from having to pay back the interest that goes along with a business loan. Essentially it allows you to collect funds in the form of donations.

While businesses can offer incentives or (now) equity in exchange for donations, this overhead is usually much smaller than what you would be facing in terms of interest payments to a bank.

Crowdfunding also offers a chance to connect with people who are truly interested in what you’re doing and who believe in you on a personal level– not just in your business model.

 

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Image courtesy of jannoon028FreeDigitalPhotos.net

 

There’s no question that crowdfunding is a workable and viable financing method; so for entrepreneurs looking to get on board, here are few tips to take note of moving forward:

1. Plan a marketing campaign — Your crowdfunding campaign will only yield returns under an effective marketing campaign. Make sure you sketch out a marketing plan ahead of time and avoid the “build-it-and-they-will-come” mentality.

2. Research and know your target audience — When you do go to market your crowdfunding campaign, you need to know who to market it to. Try and identify those who are most likely to donate and make sure they know about your campaign.

3. Create a pitch video for your project — A pitch video should be a short, 30-second-or-less clip explaining your project, what it’s about and why you’re asking people to donate. While it should be short and to-the-point, it should also be convicting and passionate.

Here are a few helpfulexamples.

4. Leverage your social media following — Businesses that have a substantial social media following have a tremendous opportunity to get their campaign in front of a lot of eyes. Use your social media account as a component of your marketing campaign; though make sure not to put all your eggs in this one basket.

5. Have incentives — Smaller projects can sometimes get away with not having any incentives and just asking for donations. However, incentives are always going to increase the likelihood that people will donate. Whatever those incentives might be, make sure to keep it low-cost so that you’re not needlessly increasing overhead.

6. Have a spending plan in place — Once you start to bring in money, you’ll want to have a plan in place for how you eventually intend to spend it. In fact, it doesn’t hurt to have this information available to potential donors from the beginning, so that they know exactly how their money is being used.

Also be sure to follow up with those who donate to let them know how you’re using their money and what level of success your project is seeing.

Not a Passive Solution

On the surface, crowdfunding might seem like asking for a handout or getting free money; however, that’s not the case at all.

Crowdfunding isn’t a passive solution to your business project; it requires a tremendous amount of work and preparation, both before, during and after you launch the campaign. While it does give you more flexibility and independence than traditional methods of financing, it still requires you to be sharp and well-prepared for the task at hand.

That being said, if you can be proactive and thorough about your approach, a crowdfunding campaign could be ideal for your business needs.

Camille McClane is a freelance writer and online entrepreneur who hopes to have her very own business someday. Working withHostPapa has given her the opportunity to share her knowledge of the online world, including SEO and social media marketing. Entrepreneurs today have so many options, and she highly encourages others to explore all of them!

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