No one can deny that raising funds from traditional sources can be quite a challenge these days. With the way the economy is going, you need to be a little more creative if you want to raise enough money to fund your next startup project. Thankfully, however, the new JOBS (Jumpstart Our Business Startups) Act made crowd funding a legal way to raise money from the masses.
What is crowdfunding and why should you consider it?
Crowdfunding can best be defined as the process of pooling resources to support initiatives or startup projects mainly through the internet. It can be used to raise funds for a wide variety of startup businesses, free software development, scientific research, disaster relief and citizen journalism projects, movies and political campaigns. With the signing of the JOBS Act in April 2012, private companies are now allowed to solicit investment from the public – an act that was previously prohibited by law.
Crowdfunding delivers. Some of the most notable crowdfunding campaigns include those of Pebble SmartWatch and indie recording star Amanda Palmer which raised $10 million and $1.2 million, respectively. While these results are not in any way common, it can give you an idea on how effective crowdfunding can be.
How can you successfully implement a crowd funding campaign?
How can you make it work for you? Here are some tips that may help you raise enough capital to fund your next startup project:
Do your research. Try to see what worked for others. How did they go through with their marketing campaign and what were the rewards they offered? This should give you an idea of how you should conduct your own campaign.
Build a following and expand your reach. Having a fan base or a network who is interested in what you do can make a big difference. If you don't have such a big following, consider launching an email and social media marketing campaign to share your ideas with others. Blogging about your project, writing a press release and creating an enticing pitch video also help a lot so consider doing all of these to support your campaign.
Engage your network. Crowd funding works effectively when you involve your network right from the get go so share your ideas, ask for their opinion and/or ask them to help spread the word about your campaign.
Give attractive rewards. What should you give to your donors in return for all their help? Consider giving something that is quite useful and/or attractive. While you should give higher rewards to those who contributed bigger amounts to your campaign, you should still give something nice to all your small contributors. Keep in mind that even small amounts count a lot.
Be transparent. The ability to justify your budget can spell the difference between a successful campaign and one that is destined to fail so make sure your followers know how the money will be used. Provide periodic updates and make sure that they see the project in action within the expected time frame.
Crowd funding is an effective vehicle that can help you realize your goals so make sure you do it right.