Crowdfunding
In this lesson, you’ll learn the different types of crowdfunding and which one to use to fund your project.
Crowdfunding is the practice of funding a project or venture by raising monetary contributions from a large number of people.
Crowdfunding is a form of crowdsourcing and alternative finance.
The modern crowdfunding model is based on three types of actors:
– the project initiator who proposes the idea and/or project to be funded
– individuals or groups who support the idea
– a moderating organization (the “platform”) that brings the parties together to launch the idea
Is it free?
Well, usually these platforms charge you about 5% of the amount you are asking for.
Not all products are suitable for a crowdfunding campaign.
Tips:
– Use a single product
– Use a tangible product
– Your product must be something new
– Your product must solve a real problem
You can have a look at Kickstarter’s Statistics to see what are the categories that work well.
(1) Reward-based Crowdfunding
In reward-based crowdfunding, backers typically contribute small amounts of money (typically between $1 and $1,000 but sometimes more) in exchange for a reward. This reward is often, but not always, the item being produced, such as a watch, an album or a film.
http://kck.st/2e9vHWm
Examples of Platforms:
Kickstarter:
https://www.kickstarter.com/
Indiegogo:
https://www.indiegogo.com/
Teespring (only crowdfunding t-shirts):
https://teespring.com/
(2) Donation-based Crowdfunding
Donors generally donate small amounts and don’t get a reward beyond the gratitude of the project creator or beneficiary (and possibly a tax deduction).
Examples of Platforms:
Donorschoose.org:
https://www.donorschoose.org/
Youcaring:
https://www.youcaring.com/
(3) Equity Crowdfunding
Investors give larger amounts of money and don’t get a reward, but instead, a small piece of equity in the company itself.
Examples of Platforms:
AngelList:
https://angel.co/
Crowdfunder:
https://www.crowdfunder.com/
(4) Debt Crowdfunding
Unlike other forms of crowdfunding, it’s NOT an exchange for a reward or equity. The investors don’t get a reward and they don’t get a piece of equity in the company, but instead they make a loan with the expectation to get paid back the principal plus interest.
There are many crowdfunding platforms.
They may be specialized in one type of crowdfunding (donation-based for example), or in one sector (music), or be specific to a country, etc.
Here is a list of the main crowdfunding platforms:1) Kickstarter
2) Indiegogo
3) Crowdfunder
4) RocketHub
5) Crowdrise
#1 Share your story
People on crowdfunding platforms care as much about your story as about your product.
It also makes the project more convincing.
#2 Make a great video
Videos are great for visibility and online virality. They also help visitors understand your project better.
However, making a video is time-consuming, costs money and an amateur-like video could damage your credibility.
#3 Deliver great rewards
People will back your project if they like it but also if you offer great rewards.
– You can limit the number of the higher rewards. This will inflate demand for those rewards and improve your general results in the campaign.
– You can also use secret rewards or introduce a new reward during the campaign (based on the visitors’ feedback, for example).
#4 Communicate often
Post regular updates, communicate with your backers, answer their questions and feedback.
Reward-based Crowdfunding: Small amount of money in exchange for a reward
Donation-based Crowdfunding: Small amount of money for a non-profit
Equity Crowdfunding: Large amount of money in exchange for equity
Debt Crowdfunding: Borrow small amounts of money from multiple people
Browse a crowdfunding platform and find the most creative crowdfunding campaign currently active (paste the link below).We’ll post our favorite one on the LinkedIn group!
– https://www.kickstarter.com/
– https://www.indiegogo.com/
