Crowdfunding 101 - Here Is Everything You Must Know Before Starting A Crowdfunding Campaign For Your Startup
24 min reading

Crowdfunding 101 - Here Is Everything You Must Know Before Starting A Crowdfunding Campaign For Your Startup

Finance
Dec 28
/
24 min reading

WHAT IS CROWDFUNDING?

There are various traditional means entrepreneurs can raise funds for new businesses or projects and there are also renovated ways that suit the digital era. One of these renovated methods is Crowdfunding. 

Article features:

  1. What is Crowdfunding?
  2. How do I start Crowdfunding?
  3. What are the types of Crowdfunding?
  4. 5 examples of Crowdfunding platforms that serve startups
  5. Which Crowdfunding platform is best for a startup?
  6. Are there any startups that became Successful from Crowdfunding?
  7. Crowdfunding FAQs
  8. Conclusion

So what is crowdfunding? It is the new method of empowering entrepreneurs and startups to grow from little to no capital to expansion. 

It is the practice of raising a modest sum of money from a large number of people to finance a new business endeavor. Crowdfunding uses social media and crowdfunding websites to connect investors and entrepreneurs. By enlarging the pool of investors outside the typical circle of owners, family, and venture capitalists, Crowdfunding has the potential to boost entrepreneurship and startup businesses. 

It is a method of raising money for a particular cause or project by demanding people to make financial contributions, typically in affordable amounts over a short period, like a few months. Because of the digitization of the world today, Crowdfunding is now usually done online and so is frequently carried out through social networks, which makes it simple for supporters to spread the word about a startup, project, or cause to their networks or communities.

Very importantly, Crowdfunding can be used by organizations, companies, and people for any kind of projects, such as a personal expense, a creative effort, a business launch, or a philanthropic cause. It is crucial to know that Crowdfunding is not a new concept of fundraising. It has been there for a while. 

Crowdfunding was used to partially fund charity projects like Nelson's Column as well as the base of the Statue of Liberty was funded by hundreds of tiny donations made in response to newspaper advertisements. But as the internet and technology have developed, Crowdfunding is increasing in popularity, and startup companies of all kinds are utilizing it to their fullest potential.

Entrepreneurs now have the chance to raise hundreds of thousands or millions of dollars from anyone with money to invest through Crowdfunding. It is worth noting that now, anyone with a business idea can use crowdfunding to present it to interested investors for establishment.

HOW DO I START CROWDFUNDING?

The growth of crowdfunding presents startup companies and entre[preneurs with new prospects that go beyond a much-needed infusion of cash. Therefore, how can startups run Crowdfunding to successfully reach their goals? What are the tips or strategies to follow? 

These pointers will increase the likelihood that startups' Crowdfunding campaigns will be successful in accomplishing their objectives.

  1. Set a financial goal for your startup
  2. Choose a Crowdfunding campaign
  3. Market your Crowdfunding project
  4. Gain social support for your Business idea/project
  5. Research similar projects for inspiration and tips
  6. Sustain effective communication with your backers and potential backers
  7. Create a captivating video for your audience that also market your project clearly

1. RESEARCH SIMILAR PROJECTS FOR TIPS AND INSPIRATION

Researching past projects similar to yours is vital as it gives you insight into what or what not to do for your campaign and business goals and objectives to be achieved. Some sites for Crowdsourcing do not remove campaigns after they have concluded (whether they were successful or failed), which is a fantastic chance to research initiatives that are similar to your own and learn what works and what doesn't.

2. SET A FINANCIAL GOAL FOR YOUR STARTUP

This is the first step every entrepreneur and startup owner planning to run a Crowdfunding campaign should do to ensure the long-term success of the campaign. It is very crucial to make an effort to establish your financial target as modestly as you can. Determine how much money you'll need to raise to take care of your business’ objective as well as any other costs, such as the Crowdfunding platform's fee. 

3. CHOOSE A CROWDFUNDING PLATFORM

Choosing a Crowdfunding platform for your Crowdfunding campaign is the next big step to starting your Crowdfunding. This is where the whole success goal lies. Remember, Crowdfunding platforms make it possible for startups to raise money from a large number of small investors, typically through an online campaign. 

Moreover, there are several different platforms to choose from, each with its strengths and weaknesses and this makes it crucial for you to critically decide on which platform to run your Crowdfunding campaign. Moreso, it's critical to take into account your campaign goals, the kind of goods or services you're supporting, and the profile of your possible investors when selecting a Crowdfunding platform. 

You should also think about the platform's fees and whether or not the campaign will allow you to offer ownership in your company. 

4. MARKET YOUR CROWDFUNDING CAMPAIGN

The success of your Crowdfunding campaign depends heavily on marketing because, without marketing, you can impossibly create awareness for investors to know that a project that needs fundraising is ongoing or has been initiated. Although crowdfunding websites will host your project, it is up to you to publicize it beforehand. 

Before the start of your campaign, set aside some time to use social media, the press, networking, exhibitions, local radio, and promotional materials to build interest in your cause. On the first day of your campaign, try to have several potential investors ready to support your business idea.

Additionally, it is crucial to plan your crowdfunding campaign's promotion during the campaign because you can face a lull following the campaign's first launch.

5. GAIN SOCIAL SUPPORT FOR YOUR BUSINESS IDEA/PROJECT

Recall that the essence of Crowdfunding is to raise money to support a Startup company or business idea or project with great potential. Hence, it is important to gain the support of the community or society where this business would be established.

Begin the process of getting social support for your business idea by asking your loved ones if they would be interested in investing in your idea. If the answer is no, it is unlikely that investors who can see thousands of projects that are competing with yours would wish to support you. Get input from your loved ones and friends, then take it to heart.

Make sure that all of your family and friends are prepared to start funding your project on the first day of the Crowdfunding campaign if they show an interest in investing. This can be a great indication that you have a good idea. This can encourage other potential backers to invest in your project by spreading the word about it.

6. SUSTAIN EFFECTIVE COMMUNICATION WITH YOUR BACKERS AND POTENTIAL BACKERS

Make sure you are explicit in your communication about the nature of your business idea, the goals it seeks to achieve, the amount of funding required to make it happen, and the specifics of what you will produce and when. Any questions posed to you should be answered. Answer the questions as publicly as you can, but in some circumstances, you might wish to respond privately.

When you do have backers, be careful to keep them informed about your project and always inform them if you believe you won't meet a deadline you had previously established. 

7. CREATE A CAPTIVATING VIDEO FOR THE AUDIENCE THAT MARKETS YOUR BUSINESS IDEA/PROJECT

This is another crucial step to hitting a Crowdfunding campaign goal for your Startup because video marketing is very vital for any business.  So, Create a captivating video for your audience that also markets your project.

Budget for a video that demonstrates the advantages of your project compellingly. To get the most out of your budget, when designing the content, make a film that may be used for future marketing chances.

WHAT ARE THE TYPES OF CROWDFUNDING?

Crowdfunding is one method of obtaining cash for new and growing enterprises. However, the entrepreneur needs to take a few factors into account for Crowdfunding to be most effective. The model to choose from among them is one. While some forms of crowdfunding do not demand returns on investment (ROI), others do. Each type also has benefits and drawbacks. As you prepare for the project, it will therefore be vital to think about which option you have.

The various types of Crowdfunding are:

  1. Equity Crowdfunding
  2. Peer-to-Peer Crowdfunding
  3. Reward-Based Crowdfunding
  4. Donation-Based Crowdfunding
  5. Profit-Sharing Crowdfunding
  6. Hybrid Model

EQUITY CROWDFUNDING

Equity Crowdfunding is a type of Crowdfunding that is similar to purchasing and selling company stock. In this case, investors provide the entrepreneur with funding in exchange for shares. Even though the company is not registered with a stock exchange, the ROI in this situation consists of shares or stakes in the company. As a result, after making contributions to the business, the investors share ownership of it.

This model has the advantage that shareholders serve as the company's marketers. Just consider having 300 shareholders who each own 200 shares of your company. This gives you 300 opportunities for advertising. This is because investors, who are also a portion of the company's owners, will want it to grow. 

Furthermore, the entrepreneur controls investor contributions since he chooses how many shares to issue and their respective prices. However, because it's a long-term investment with a potential delay in ROI, the entrepreneur may have trouble locating investors in this situation.

PEER-TO-PEER OR DEBT CROWDFUNDING

This type of Crowdfunding is usually executed with a loan. Here, an entrepreneur takes money from a particular group he belongs to and promises to pay it back with interest. In other words, peer-to-peer Crowdfunding, often referred to as debt crowdfunding, involves borrowing money from a lot of investors, who will then be charged interest on the money. This is more akin to taking out a loan from a regular bank, but there are many more investors engaged, and the money sourcing is typically done online.

This sort of crowdfunding has the advantage of giving SMEs and start-ups access to financing without requiring them to put up security. Entrepreneurs who couldn't meet the criteria set by conventional banks to receive loans would also benefit from this. Therefore, even if they lack the resources to do so, entrepreneurs can use loans to launch their firms. 

The investors can, however, demand a larger rate of interest than the bank would have required. Another drawback is that, similar to other forms of crowdsourcing, investors may demand to know every detail about the prospective firm. This can lead the business owner to reveal all of his trade secrets, running the danger of having his ideas stolen by rivals and idea snatchers.

REWARD-BASED CROWDFUNDING

This also goes by the name *Seed Crowdfunding". This entails taking out a public loan to repay it in kind. In this case, non-financial rewards are given to investors in exchange for their investment in the company. The reward could take the form of free services, discounted services, early access to finished items, community service, honoring investors, thank-you notes, and more.

This type of business has a lot to offer entrepreneurs. First of all, the no-interest feature lowers the cost of capital raising for business owners. Additionally, the business owner has complete control over his enterprise. However, investors could not come forward because the ROI does not result in a financial advantage.

This implies that entrepreneurs looking for a significant sum of money would have trouble using this strategy.

DONATION-BASED CROWDFUNDING

Usually, this is done for altruistic reasons. It occurs when members of the public give money to a project without anticipating a return in kind or currency. There is no predetermined amount of money that each investor must invest in donation-based crowdfunding. 

They typically provide little sums of money to raise the enormous amount required. However, recipients frequently promote substantial donations by rewarding them. The invested money is never refunded, though. The ideal kind for humanitarian purposes is this one. 

For funding their initiatives, NGOs and other charitable organizations should use this method. However, investors do not frequently make sizable contributions due to a lack of ROI. It is inappropriate for capital-intensive projects because of this.

PROFIT SHARING CROWDFUNDING

This is often referred to as crowdfunding with income sharing. As the name implies, business owners who follow this model repay their investors by splitting the company's profits. Investors must contribute a set sum of money for this to occur. The advantage of this arrangement is that the business owner is only required to pay ROI from profits made by the company.

The use of this approach may be best appropriate for high-risk firms that may or may not be profitable. When profits are high, returns are higher; when profits are low, returns are lower. As a result, business owners are not under any need to repay their investors because they will be compensated as long as a profit is achieved. Therefore, how investors get reimbursed depends on the company's financial performance.

One arrangement that greatly benefits both investors and investors is this particular type of Crowdfunding. It will be necessary to persuade investors that the company would be lucrative for them to part with their money, though.

HYBRID MODEL CROWDFUNDING

As the name implies, this approach combines two or more forms of crowdfunding based on the requirements and preferences of the entrepreneur.

Be aware that selecting the kind of crowdfunding that is appropriate for you necessitates taking into account the goal and the intended investors. You must take into account the kind of project you want to be supported and its aim when defining its purpose. You must decide whether you want business titans on your team or just anyone interested in the goal when referring to intended investors. This indicates that you need to do more study on the types of investors each sort of crowdsourcing draws. You won't make mistakes if you do it that way.

5 EXAMPLES OF CROWDFUNDING PLATFORMS FOR  STARTUPS

There are numerous internet channels for crowdfunding that you can use to raise funds for your project including charity initiatives. However,  these are examples of the numerous that serve startups.

  1. Indiegogo
  2. Kickstarter
  3. Fundable
  4. SeedInvest
  5. Patreon

INDIEGOGO 

Indiegogo is one of the top Crowdfunding platforms that sestartups'tups needs. With more than 19,000 campaigns starting each month, Indiegogo has grown to become one of the most well-known crowdfunding platforms worldwide since its 2008 founding. Overall, Indiegogo has unmatched powers, adaptability, and functionality. Additionally, since it is one of the biggest platforms for crowdfunding available worldwide, campaigns have access to a variety of investment alternatives.

Indiegogo is best for, startups, young businesses

startups aiming for a worldwide clientele, it is available in a total, of 235 nations and territories. It is best also for its ability to interact with Facebook and Google to effectively promote advertising

It is further suitable for startups because you are not required to stop raising money using this site for Crowdfunding at a particular period. There are no set goals or timelines for raising money, and you can use equity, securities, revenue-sharing, or even the selling of cryptocurrencies.

KICKSTARTER 

One of the most well-known and well-liked crowdfunding platforms that serve startup needs is Kickstarter. It makes sense given that the site has been around for more than ten years and currently has over 15 million project backers.

As a Crowdfunding platform for startup companies, it is best and recommended for Tech startups, startups in the arts and design niche, and Australian, American, and European startups among others.

Kickstarter is a reliable and well-known platform. It accepts campaigns that can reach more than 15 million project supporters worldwide.

Services are accessible in six international locations.

FUNDABLE 

This popular crowdfunding website was created with startups and small enterprises in mind; so far, it has assisted users in raising over $568 million in pledged cash. Create a Fundable profile first, then select the program to get going. With their rewards program, consumer-facing businesses enable entrepreneurs to sell their goods for up to $50,000. (that includes taking pre-orders and selling merchandise).

You should use their equity crowdfunding model if you're searching for a higher degree of investment because it enables businesses to raise between $50,000 and $10 million for their goods, service, or B2B-based venture by soliciting funds from approved investors.

On Fundable, you can create a company profile at no cost. However, once you decide you want to start raising money, you must pay a monthly subscription fee, which starts at $179. There are no success fees, but there is a processing cost of 3.5% + $.30 for each transaction for funding depending on rewards.

SEEDINVEST

To boost early- and seed-stage entrepreneurs' access to money and connect them with a large network of angel and venture capital investors, SeedInvest was created as a crowdfunding platform. Businesses that make it through the rigorous vetting process and are funded on the platform, where more than 235 startups have been funded successfully since its launch in 2012, are more likely to succeed.

The Seedinvest Crowdfunding platform is best for

  1. Pre-seed businesses
  2. Young businesses
  3. IT startups

Through this network, startups have the chance to interact with angel investors and venture capital firms. Also, Successful campaigns do not have to pay any costs. Furthermore, entrepreneurs have access to a large network of resources and investors through this platform.

PATREON 

The popular crowdfunding site Patreon 

is utilized by creative groups to promote Startup companies and fund projects. Since its launch, the platform has facilitated more than $2 billion in fan, family, and friend crowdfunding to creators.

Patreon is best for:

  1. Startups in the arts
  2. Lifestyle businesses
  3. Small business

On the Patreon platform, users can set up recurring monthly payments. The platform's adaptable funding possibilities make it perfect for creative professions. Also, accessible integrations make campaign promotion simple on the Patreon platform.

WHAT IS THE BEST CROWDFUNDING PLATFORM FOR STARTUPS? 

It may be challenging to determine which Crowdfunding platform is best for your Startup when starting your crowdfunding campaign.

However, choosing what you want to raise money for or your business niche or even project may be the easiest step especially when you want to start your own business.

According to Uswitch in the article The Most Popular Crowdfunding Sites, "we created the Crowdfunding Index to get a better knowledge of the accomplishments of the most well-known crowdfunding websites. We used a min-max normalization method to analyze the 15 most popular crowdfunding sites on our original seed list. 

The analysis was based on five criteria: total funds raised, donations received, campaigns launched, Instagram hashtags, and search volume data. Indiegogo was discovered to be the most well-liked platform for business and investment crowdfunding sites, with over 9 million donors on the site and 444,721 Instagram hashtags, as well as being London’s favorite platform".

Indiegogo, which was first established to support initiatives like theatre and cancer treatment, is today a global platform with over 9 million supporters that accept campaigns in a range of sectors, from consumer technology to community betterment. Since 2008, the Indiegogo community, driven by curiosity, has assisted in the realization of more than 800,000 creative ideas. 

Its supporter base now numbers over 9 million and includes 235 nations and territories. Its group thrives on generating ingenious discoveries before everyone else and is constantly searching for novel solutions to daily issues. Curious people rely on Indiegogo to discover the newest developments in technology and design, from live campaigns to ready-to-ship technology.

Why Indiegogo is Best for startups:

  1. It has the lowest platform fee of 5%
  2. It is global with accessibility not limited to any continent or country.
  3. Since it is one of the first established Crowdfunding platforms, campaigns on Indiegogo always reach entrepreneurs' goals and expectations with ease.
  4. Furthermore, campaigns on this platform reach a wide range of investors and sponsor fast and seamlessly.
  5. 10 million people from all around the world visit Indiegogo each month to see what's new so startup campaigns are liable to financial goals successfully.
  6. 234 countries and territories of the world are home to indigenous users. This makes campaigns here reach anyone anywhere and make such campaigns also prone to success.
  7. 19,000 campaigns are launched every month on Indiegogo.
  8. Flexible criteria for launching campaigns on the platform.
  9. Connecting with Google and Facebook to better promote campaigns.

Ingenious and unusual products that address both big and minor difficulties in daily life may be found on Indiegogo, which is visited by millions of people worldwide. Generally, Indiegogo aids in the discovery of innovations in tech, design, and other fields by providing entrepreneurs with a platform to release novel goods before they become widely adopted.

ARE THERE ANY STARTUPS THAT BECAME SUCCESSFUL FROM CROWDFUNDING?

I'd you've ever wondered where there has ever been any Startup that became Successful from Crowdfunding, the answer is yes! Tons of startups have grown to global recognition and expansion today from Crowdfunding.

According to a recent Uswitch study, Crowdfunding websites have contributed to the funding of 6 million projects in the previous years and are now an important part of many business strategies. Crowdfunding as a source of capital for enterprises is gaining popularity everywhere more than ever. 

Crowdfunding is a terrific tool for entrepreneurs to grow their brand and client base in addition to its financial advantages. The top 15 crowdfunding websites worldwide, including GoFundMe and Kickstarter, were discovered by the broadband specialists at Uswitch as part of their Crowdfunding Index.

In light of this, Uswitch identified the multi-million dollar businesses that began as crowdfunding initiatives and spoke with Simon Bro of LuggageHero to understand why this kind of fundraising has been essential to the company's success.

Check out some of the most prosperous companies listed below:

  1. Oculus VR
  2. Popsockets
  3. Peloton
  4. Monzo
  5. Brewdog

OCULUS VR

Palmer Luckey, then 20 years old, came up with the concept of virtual reality as a headset that was more advanced than what was presently available yet still affordable for gamers. The Oculus VR prototype was created by founding a company with John Carmack, who was collaborating on a related project at the time. 

After establishing their business, the two founders used the crowdfunding website Kickstarter to raise money for a project. With the support of 9,500 backers, they raised over £1.7 million, making it one of the biggest crowdfunding success stories of 2012.

By increasing its visibility through Kickstarter, the business was later able to be acquired by Facebook in 2014, becoming the multi-billion dollar firm it is today.

POPSOCKETS

PopSockets, a prosperous startup business, has demonstrated that Kickstarter is one of the best Crowdfunding platforms to go for creative projects. After growing tired of his headphone wires tangling, David Barnett established the firm in 2010 that is now well-known for helping you handle your phone.

David added two buttons to the back of his phone to fix the issue, but when friends mocked the unsightly design, he learned 3D CAD and produced 60 prototypes before starting the Kickstarter campaign in 2012. Since its inception, the campaign has raised over £13 million, and it continues to be one of Amazon's best-selling items.

PELOTON

The Peloton Exercise bike was created in 2012 by founder John Foley, who combined cycling with the studio environment. Peloton, a multimillion-dollar company, gained success on Kickstarter in 2013. It raised £226,000 on the platform and, as a result of its distinctive combination of hardware and software for at-home exercise, became one of the most sought-after businesses by investors.

Peloton is the next best alternative training system for staying fit and healthy if you don't have the time or money for a regular spin session at the gym. Since we started our first campaign on Seedrs two years ago, crowdfunding has significantly impacted LuggageHero's growth, according to Simon, a spokesperson for the company said

"We needed financial support from investors as a business to expand, and using Crowdfunding to do so was exciting and fulfilling".

He further stated; "Using crowdfunding websites enables more people to invest in your business because they may make donations of any size, making it possible for customers to join in on your purpose as well. As a result, more people were interested in following the company's performance and would tell their friends about it, increasing word-of-mouth investments as well".

MONZO

The founders of Monzo met while they were employed by Starling Bank and later launched the new bank in 2015 as an entirely app-based model. Monzo achieved the record for the fastest crowdfunding campaign in history by using Crowdcube, the equity crowdfunding platform, to raise £1 million in just 96 seconds. The business later raised £20 million through crowdfunding sites and was ranked as Crowdcube's third-best unicorn company for 2018 as a result.

BREWDOG

James Watt and Martin Dickie, two Scottish men, began home-brewing small batches of craft beers in 2007 because they had grown tired of tasteless beer. Less than a year later, Brewdog was established. When the company introduced Equity for Punks on the investment Crowdfunding website Crowdcube in 2011, it was guaranteed to be successful. Brewdog, one of the site's most popular unicorns today, raised a staggering £126 million during the campaign, setting a world record for equity crowdfunding.

FAQ 

Here are the responses to the top queries about crowdfunding, which is a growing alternative financing option.

Q: What distinguishes reward-based crowdfunding from donation-based crowdfunding?

A: Although they are occasionally mistaken for one another, reward-based and donation-based crowdfunding are two distinct crowdfunding approaches.

Reward-based campaigns must provide supporters with non-monetary prizes like goods, services, or experiences. They frequently employ the "All or Nothing" (AON) approach, which guarantees that all backers will receive a refund if the campaign falls short of its financing target.

Only initiatives managed by a recognized nonprofit organization or volunteer group are eligible for donation-based campaigns. Without expecting anything in return, backers donate money. These campaigns frequently employ the "Keep it All" (KIA) approach, which allows them to keep every dollar they get, even if they fall short of their donation target.

Q: How do I know which crowdfunding website to pick for my startup campaign?

A: The best way to know which platform to pick for your campaign is by first analyzing the nature of your business and the goals you set to achieve. Knowing that different platforms serve different purposes or are set to finance startups in specific niches, you can watch out for platforms like Indiegogo, Kickstarter, and SeedInvest among others that are borderless and also focus on helping startups in business and investment niches. So if your project idea is on music, art, or charity, you should not think of these platforms.

Q: Can I conduct a campaign simultaneously on multiple platforms for Crowdfunding?

A: Even while the majority of websites don't forbid you from publishing to numerous funding platforms at once, doing so can harm your campaign. The main issue is lost momentum because investors prefer to see you getting closer to your financial target. 

A project's momentum is diminished if it is posted on many websites since collaborators are dispersed among various venues. Additionally, you have a greater possibility of not reaching your target and losing all the funds you garner if you are on an "all or nothing" crowdfunding website.

Being on many platforms might potentially confuse backers and the press. Which website are you directing people to learn more about your initiative and donate to it? It is better to focus all of the media attention from the press and social media on a single fundraising campaign. 

Additionally, you are certainly aware of the effort required to promote, maintain, and update your campaign while you are raising money. A successful raise involves updating your content, giving updates, adding new videos, and sometimes even additional rewards. 

In light of this, how many websites would you truly wish to oversee every day?

Q: Must I post and solicit funds as a legal entity on Crowdfunding platforms?

A: Both yes and no are the answers to this. You do not need to be formed as a legal entity if you are crowdfunding using the contribution or reward models. These can be useful channels for putting ideas to the test. However, to take part in equity and lending crowdfunding, you must be a legitimate entity. The exception: You might apply for a loan as an individual on a lending website like Prosper.com or Lending Club, and then possibly use the proceeds for a business purpose.

Q: Can I crowdfund if I wish to keep the identity of my unpatented idea or product a secret?

A: First, before starting a crowdfunding campaign, you should apply for at least a provisional patent if you have any worries about this matter. However, depending on the product, you might be able to publish a campaign without disclosing the special features you want to keep secret, so you don't have to post precise illustrations of your idea. You can discuss the advantages of your product and the issues it resolves without going into specifics about the design.

Q: Why do crowdsourcing platforms scrutinize the projects that are posted?

A: Not all platforms for crowdfunding screen the projects that are submitted, but the majority do. On contribution and rewards sites, projects are generally scrutinized to make sure they adhere to the platform's rules and are appropriate for that specific site, not as a way to judge the merit of the concept. 

For instance, my business, peerbackers, wants to make sure you have a basic understanding of how to crowdfund as well as access to several social media platforms. I like to post on a website that evaluates and curates its content so I can be sure my project will be among quality submissions.

The present equity crowdfunding model requires businesses to examine projects for characteristics that would fulfill investors' expectations, like a strong team and market traction; typically, only a very tiny fraction of entries are authorized to publish.

CONCLUSION

It can be challenging to finance your entrepreneurial aspirations. Money doesn't always go as far as you expect it to, and loans to launch your firm come with stringent requirements like minimum credit scores and required collateral. Because of this, aspiring and even seasoned business owners prefer Crowdfunding. Through crowdfunding, potential investors are directed directly to your bank account. 

Your crowdfunding campaign will be hosted by websites like Kickstarter, Indiegogo, and Patreon for a charge, making it possible for potential investors to learn about it and donate. There arfewerss restrictions on raising money compared to getting a loan or finding investors in other means, and you may almost sell it as you want.

Crowdfunding 101 - Here Is Everything You Must Know Before Starting A Crowdfunding Campaign For Your Startup
24 min reading

Crowdfunding 101 - Here Is Everything You Must Know Before Starting A Crowdfunding Campaign For Your Startup

Finance
Dec 28
/
24 min reading

WHAT IS CROWDFUNDING?

There are various traditional means entrepreneurs can raise funds for new businesses or projects and there are also renovated ways that suit the digital era. One of these renovated methods is Crowdfunding. 

Article features:

  1. What is Crowdfunding?
  2. How do I start Crowdfunding?
  3. What are the types of Crowdfunding?
  4. 5 examples of Crowdfunding platforms that serve startups
  5. Which Crowdfunding platform is best for a startup?
  6. Are there any startups that became Successful from Crowdfunding?
  7. Crowdfunding FAQs
  8. Conclusion

So what is crowdfunding? It is the new method of empowering entrepreneurs and startups to grow from little to no capital to expansion. 

It is the practice of raising a modest sum of money from a large number of people to finance a new business endeavor. Crowdfunding uses social media and crowdfunding websites to connect investors and entrepreneurs. By enlarging the pool of investors outside the typical circle of owners, family, and venture capitalists, Crowdfunding has the potential to boost entrepreneurship and startup businesses. 

It is a method of raising money for a particular cause or project by demanding people to make financial contributions, typically in affordable amounts over a short period, like a few months. Because of the digitization of the world today, Crowdfunding is now usually done online and so is frequently carried out through social networks, which makes it simple for supporters to spread the word about a startup, project, or cause to their networks or communities.

Very importantly, Crowdfunding can be used by organizations, companies, and people for any kind of projects, such as a personal expense, a creative effort, a business launch, or a philanthropic cause. It is crucial to know that Crowdfunding is not a new concept of fundraising. It has been there for a while. 

Crowdfunding was used to partially fund charity projects like Nelson's Column as well as the base of the Statue of Liberty was funded by hundreds of tiny donations made in response to newspaper advertisements. But as the internet and technology have developed, Crowdfunding is increasing in popularity, and startup companies of all kinds are utilizing it to their fullest potential.

Entrepreneurs now have the chance to raise hundreds of thousands or millions of dollars from anyone with money to invest through Crowdfunding. It is worth noting that now, anyone with a business idea can use crowdfunding to present it to interested investors for establishment.

HOW DO I START CROWDFUNDING?

The growth of crowdfunding presents startup companies and entre[preneurs with new prospects that go beyond a much-needed infusion of cash. Therefore, how can startups run Crowdfunding to successfully reach their goals? What are the tips or strategies to follow? 

These pointers will increase the likelihood that startups' Crowdfunding campaigns will be successful in accomplishing their objectives.

  1. Set a financial goal for your startup
  2. Choose a Crowdfunding campaign
  3. Market your Crowdfunding project
  4. Gain social support for your Business idea/project
  5. Research similar projects for inspiration and tips
  6. Sustain effective communication with your backers and potential backers
  7. Create a captivating video for your audience that also market your project clearly

1. RESEARCH SIMILAR PROJECTS FOR TIPS AND INSPIRATION

Researching past projects similar to yours is vital as it gives you insight into what or what not to do for your campaign and business goals and objectives to be achieved. Some sites for Crowdsourcing do not remove campaigns after they have concluded (whether they were successful or failed), which is a fantastic chance to research initiatives that are similar to your own and learn what works and what doesn't.

2. SET A FINANCIAL GOAL FOR YOUR STARTUP

This is the first step every entrepreneur and startup owner planning to run a Crowdfunding campaign should do to ensure the long-term success of the campaign. It is very crucial to make an effort to establish your financial target as modestly as you can. Determine how much money you'll need to raise to take care of your business’ objective as well as any other costs, such as the Crowdfunding platform's fee. 

3. CHOOSE A CROWDFUNDING PLATFORM

Choosing a Crowdfunding platform for your Crowdfunding campaign is the next big step to starting your Crowdfunding. This is where the whole success goal lies. Remember, Crowdfunding platforms make it possible for startups to raise money from a large number of small investors, typically through an online campaign. 

Moreover, there are several different platforms to choose from, each with its strengths and weaknesses and this makes it crucial for you to critically decide on which platform to run your Crowdfunding campaign. Moreso, it's critical to take into account your campaign goals, the kind of goods or services you're supporting, and the profile of your possible investors when selecting a Crowdfunding platform. 

You should also think about the platform's fees and whether or not the campaign will allow you to offer ownership in your company. 

4. MARKET YOUR CROWDFUNDING CAMPAIGN

The success of your Crowdfunding campaign depends heavily on marketing because, without marketing, you can impossibly create awareness for investors to know that a project that needs fundraising is ongoing or has been initiated. Although crowdfunding websites will host your project, it is up to you to publicize it beforehand. 

Before the start of your campaign, set aside some time to use social media, the press, networking, exhibitions, local radio, and promotional materials to build interest in your cause. On the first day of your campaign, try to have several potential investors ready to support your business idea.

Additionally, it is crucial to plan your crowdfunding campaign's promotion during the campaign because you can face a lull following the campaign's first launch.

5. GAIN SOCIAL SUPPORT FOR YOUR BUSINESS IDEA/PROJECT

Recall that the essence of Crowdfunding is to raise money to support a Startup company or business idea or project with great potential. Hence, it is important to gain the support of the community or society where this business would be established.

Begin the process of getting social support for your business idea by asking your loved ones if they would be interested in investing in your idea. If the answer is no, it is unlikely that investors who can see thousands of projects that are competing with yours would wish to support you. Get input from your loved ones and friends, then take it to heart.

Make sure that all of your family and friends are prepared to start funding your project on the first day of the Crowdfunding campaign if they show an interest in investing. This can be a great indication that you have a good idea. This can encourage other potential backers to invest in your project by spreading the word about it.

6. SUSTAIN EFFECTIVE COMMUNICATION WITH YOUR BACKERS AND POTENTIAL BACKERS

Make sure you are explicit in your communication about the nature of your business idea, the goals it seeks to achieve, the amount of funding required to make it happen, and the specifics of what you will produce and when. Any questions posed to you should be answered. Answer the questions as publicly as you can, but in some circumstances, you might wish to respond privately.

When you do have backers, be careful to keep them informed about your project and always inform them if you believe you won't meet a deadline you had previously established. 

7. CREATE A CAPTIVATING VIDEO FOR THE AUDIENCE THAT MARKETS YOUR BUSINESS IDEA/PROJECT

This is another crucial step to hitting a Crowdfunding campaign goal for your Startup because video marketing is very vital for any business.  So, Create a captivating video for your audience that also markets your project.

Budget for a video that demonstrates the advantages of your project compellingly. To get the most out of your budget, when designing the content, make a film that may be used for future marketing chances.

WHAT ARE THE TYPES OF CROWDFUNDING?

Crowdfunding is one method of obtaining cash for new and growing enterprises. However, the entrepreneur needs to take a few factors into account for Crowdfunding to be most effective. The model to choose from among them is one. While some forms of crowdfunding do not demand returns on investment (ROI), others do. Each type also has benefits and drawbacks. As you prepare for the project, it will therefore be vital to think about which option you have.

The various types of Crowdfunding are:

  1. Equity Crowdfunding
  2. Peer-to-Peer Crowdfunding
  3. Reward-Based Crowdfunding
  4. Donation-Based Crowdfunding
  5. Profit-Sharing Crowdfunding
  6. Hybrid Model

EQUITY CROWDFUNDING

Equity Crowdfunding is a type of Crowdfunding that is similar to purchasing and selling company stock. In this case, investors provide the entrepreneur with funding in exchange for shares. Even though the company is not registered with a stock exchange, the ROI in this situation consists of shares or stakes in the company. As a result, after making contributions to the business, the investors share ownership of it.

This model has the advantage that shareholders serve as the company's marketers. Just consider having 300 shareholders who each own 200 shares of your company. This gives you 300 opportunities for advertising. This is because investors, who are also a portion of the company's owners, will want it to grow. 

Furthermore, the entrepreneur controls investor contributions since he chooses how many shares to issue and their respective prices. However, because it's a long-term investment with a potential delay in ROI, the entrepreneur may have trouble locating investors in this situation.

PEER-TO-PEER OR DEBT CROWDFUNDING

This type of Crowdfunding is usually executed with a loan. Here, an entrepreneur takes money from a particular group he belongs to and promises to pay it back with interest. In other words, peer-to-peer Crowdfunding, often referred to as debt crowdfunding, involves borrowing money from a lot of investors, who will then be charged interest on the money. This is more akin to taking out a loan from a regular bank, but there are many more investors engaged, and the money sourcing is typically done online.

This sort of crowdfunding has the advantage of giving SMEs and start-ups access to financing without requiring them to put up security. Entrepreneurs who couldn't meet the criteria set by conventional banks to receive loans would also benefit from this. Therefore, even if they lack the resources to do so, entrepreneurs can use loans to launch their firms. 

The investors can, however, demand a larger rate of interest than the bank would have required. Another drawback is that, similar to other forms of crowdsourcing, investors may demand to know every detail about the prospective firm. This can lead the business owner to reveal all of his trade secrets, running the danger of having his ideas stolen by rivals and idea snatchers.

REWARD-BASED CROWDFUNDING

This also goes by the name *Seed Crowdfunding". This entails taking out a public loan to repay it in kind. In this case, non-financial rewards are given to investors in exchange for their investment in the company. The reward could take the form of free services, discounted services, early access to finished items, community service, honoring investors, thank-you notes, and more.

This type of business has a lot to offer entrepreneurs. First of all, the no-interest feature lowers the cost of capital raising for business owners. Additionally, the business owner has complete control over his enterprise. However, investors could not come forward because the ROI does not result in a financial advantage.

This implies that entrepreneurs looking for a significant sum of money would have trouble using this strategy.

DONATION-BASED CROWDFUNDING

Usually, this is done for altruistic reasons. It occurs when members of the public give money to a project without anticipating a return in kind or currency. There is no predetermined amount of money that each investor must invest in donation-based crowdfunding. 

They typically provide little sums of money to raise the enormous amount required. However, recipients frequently promote substantial donations by rewarding them. The invested money is never refunded, though. The ideal kind for humanitarian purposes is this one. 

For funding their initiatives, NGOs and other charitable organizations should use this method. However, investors do not frequently make sizable contributions due to a lack of ROI. It is inappropriate for capital-intensive projects because of this.

PROFIT SHARING CROWDFUNDING

This is often referred to as crowdfunding with income sharing. As the name implies, business owners who follow this model repay their investors by splitting the company's profits. Investors must contribute a set sum of money for this to occur. The advantage of this arrangement is that the business owner is only required to pay ROI from profits made by the company.

The use of this approach may be best appropriate for high-risk firms that may or may not be profitable. When profits are high, returns are higher; when profits are low, returns are lower. As a result, business owners are not under any need to repay their investors because they will be compensated as long as a profit is achieved. Therefore, how investors get reimbursed depends on the company's financial performance.

One arrangement that greatly benefits both investors and investors is this particular type of Crowdfunding. It will be necessary to persuade investors that the company would be lucrative for them to part with their money, though.

HYBRID MODEL CROWDFUNDING

As the name implies, this approach combines two or more forms of crowdfunding based on the requirements and preferences of the entrepreneur.

Be aware that selecting the kind of crowdfunding that is appropriate for you necessitates taking into account the goal and the intended investors. You must take into account the kind of project you want to be supported and its aim when defining its purpose. You must decide whether you want business titans on your team or just anyone interested in the goal when referring to intended investors. This indicates that you need to do more study on the types of investors each sort of crowdsourcing draws. You won't make mistakes if you do it that way.

5 EXAMPLES OF CROWDFUNDING PLATFORMS FOR  STARTUPS

There are numerous internet channels for crowdfunding that you can use to raise funds for your project including charity initiatives. However,  these are examples of the numerous that serve startups.

  1. Indiegogo
  2. Kickstarter
  3. Fundable
  4. SeedInvest
  5. Patreon

INDIEGOGO 

Indiegogo is one of the top Crowdfunding platforms that sestartups'tups needs. With more than 19,000 campaigns starting each month, Indiegogo has grown to become one of the most well-known crowdfunding platforms worldwide since its 2008 founding. Overall, Indiegogo has unmatched powers, adaptability, and functionality. Additionally, since it is one of the biggest platforms for crowdfunding available worldwide, campaigns have access to a variety of investment alternatives.

Indiegogo is best for, startups, young businesses

startups aiming for a worldwide clientele, it is available in a total, of 235 nations and territories. It is best also for its ability to interact with Facebook and Google to effectively promote advertising

It is further suitable for startups because you are not required to stop raising money using this site for Crowdfunding at a particular period. There are no set goals or timelines for raising money, and you can use equity, securities, revenue-sharing, or even the selling of cryptocurrencies.

KICKSTARTER 

One of the most well-known and well-liked crowdfunding platforms that serve startup needs is Kickstarter. It makes sense given that the site has been around for more than ten years and currently has over 15 million project backers.

As a Crowdfunding platform for startup companies, it is best and recommended for Tech startups, startups in the arts and design niche, and Australian, American, and European startups among others.

Kickstarter is a reliable and well-known platform. It accepts campaigns that can reach more than 15 million project supporters worldwide.

Services are accessible in six international locations.

FUNDABLE 

This popular crowdfunding website was created with startups and small enterprises in mind; so far, it has assisted users in raising over $568 million in pledged cash. Create a Fundable profile first, then select the program to get going. With their rewards program, consumer-facing businesses enable entrepreneurs to sell their goods for up to $50,000. (that includes taking pre-orders and selling merchandise).

You should use their equity crowdfunding model if you're searching for a higher degree of investment because it enables businesses to raise between $50,000 and $10 million for their goods, service, or B2B-based venture by soliciting funds from approved investors.

On Fundable, you can create a company profile at no cost. However, once you decide you want to start raising money, you must pay a monthly subscription fee, which starts at $179. There are no success fees, but there is a processing cost of 3.5% + $.30 for each transaction for funding depending on rewards.

SEEDINVEST

To boost early- and seed-stage entrepreneurs' access to money and connect them with a large network of angel and venture capital investors, SeedInvest was created as a crowdfunding platform. Businesses that make it through the rigorous vetting process and are funded on the platform, where more than 235 startups have been funded successfully since its launch in 2012, are more likely to succeed.

The Seedinvest Crowdfunding platform is best for

  1. Pre-seed businesses
  2. Young businesses
  3. IT startups

Through this network, startups have the chance to interact with angel investors and venture capital firms. Also, Successful campaigns do not have to pay any costs. Furthermore, entrepreneurs have access to a large network of resources and investors through this platform.

PATREON 

The popular crowdfunding site Patreon 

is utilized by creative groups to promote Startup companies and fund projects. Since its launch, the platform has facilitated more than $2 billion in fan, family, and friend crowdfunding to creators.

Patreon is best for:

  1. Startups in the arts
  2. Lifestyle businesses
  3. Small business

On the Patreon platform, users can set up recurring monthly payments. The platform's adaptable funding possibilities make it perfect for creative professions. Also, accessible integrations make campaign promotion simple on the Patreon platform.

WHAT IS THE BEST CROWDFUNDING PLATFORM FOR STARTUPS? 

It may be challenging to determine which Crowdfunding platform is best for your Startup when starting your crowdfunding campaign.

However, choosing what you want to raise money for or your business niche or even project may be the easiest step especially when you want to start your own business.

According to Uswitch in the article The Most Popular Crowdfunding Sites, "we created the Crowdfunding Index to get a better knowledge of the accomplishments of the most well-known crowdfunding websites. We used a min-max normalization method to analyze the 15 most popular crowdfunding sites on our original seed list. 

The analysis was based on five criteria: total funds raised, donations received, campaigns launched, Instagram hashtags, and search volume data. Indiegogo was discovered to be the most well-liked platform for business and investment crowdfunding sites, with over 9 million donors on the site and 444,721 Instagram hashtags, as well as being London’s favorite platform".

Indiegogo, which was first established to support initiatives like theatre and cancer treatment, is today a global platform with over 9 million supporters that accept campaigns in a range of sectors, from consumer technology to community betterment. Since 2008, the Indiegogo community, driven by curiosity, has assisted in the realization of more than 800,000 creative ideas. 

Its supporter base now numbers over 9 million and includes 235 nations and territories. Its group thrives on generating ingenious discoveries before everyone else and is constantly searching for novel solutions to daily issues. Curious people rely on Indiegogo to discover the newest developments in technology and design, from live campaigns to ready-to-ship technology.

Why Indiegogo is Best for startups:

  1. It has the lowest platform fee of 5%
  2. It is global with accessibility not limited to any continent or country.
  3. Since it is one of the first established Crowdfunding platforms, campaigns on Indiegogo always reach entrepreneurs' goals and expectations with ease.
  4. Furthermore, campaigns on this platform reach a wide range of investors and sponsor fast and seamlessly.
  5. 10 million people from all around the world visit Indiegogo each month to see what's new so startup campaigns are liable to financial goals successfully.
  6. 234 countries and territories of the world are home to indigenous users. This makes campaigns here reach anyone anywhere and make such campaigns also prone to success.
  7. 19,000 campaigns are launched every month on Indiegogo.
  8. Flexible criteria for launching campaigns on the platform.
  9. Connecting with Google and Facebook to better promote campaigns.

Ingenious and unusual products that address both big and minor difficulties in daily life may be found on Indiegogo, which is visited by millions of people worldwide. Generally, Indiegogo aids in the discovery of innovations in tech, design, and other fields by providing entrepreneurs with a platform to release novel goods before they become widely adopted.

ARE THERE ANY STARTUPS THAT BECAME SUCCESSFUL FROM CROWDFUNDING?

I'd you've ever wondered where there has ever been any Startup that became Successful from Crowdfunding, the answer is yes! Tons of startups have grown to global recognition and expansion today from Crowdfunding.

According to a recent Uswitch study, Crowdfunding websites have contributed to the funding of 6 million projects in the previous years and are now an important part of many business strategies. Crowdfunding as a source of capital for enterprises is gaining popularity everywhere more than ever. 

Crowdfunding is a terrific tool for entrepreneurs to grow their brand and client base in addition to its financial advantages. The top 15 crowdfunding websites worldwide, including GoFundMe and Kickstarter, were discovered by the broadband specialists at Uswitch as part of their Crowdfunding Index.

In light of this, Uswitch identified the multi-million dollar businesses that began as crowdfunding initiatives and spoke with Simon Bro of LuggageHero to understand why this kind of fundraising has been essential to the company's success.

Check out some of the most prosperous companies listed below:

  1. Oculus VR
  2. Popsockets
  3. Peloton
  4. Monzo
  5. Brewdog

OCULUS VR

Palmer Luckey, then 20 years old, came up with the concept of virtual reality as a headset that was more advanced than what was presently available yet still affordable for gamers. The Oculus VR prototype was created by founding a company with John Carmack, who was collaborating on a related project at the time. 

After establishing their business, the two founders used the crowdfunding website Kickstarter to raise money for a project. With the support of 9,500 backers, they raised over £1.7 million, making it one of the biggest crowdfunding success stories of 2012.

By increasing its visibility through Kickstarter, the business was later able to be acquired by Facebook in 2014, becoming the multi-billion dollar firm it is today.

POPSOCKETS

PopSockets, a prosperous startup business, has demonstrated that Kickstarter is one of the best Crowdfunding platforms to go for creative projects. After growing tired of his headphone wires tangling, David Barnett established the firm in 2010 that is now well-known for helping you handle your phone.

David added two buttons to the back of his phone to fix the issue, but when friends mocked the unsightly design, he learned 3D CAD and produced 60 prototypes before starting the Kickstarter campaign in 2012. Since its inception, the campaign has raised over £13 million, and it continues to be one of Amazon's best-selling items.

PELOTON

The Peloton Exercise bike was created in 2012 by founder John Foley, who combined cycling with the studio environment. Peloton, a multimillion-dollar company, gained success on Kickstarter in 2013. It raised £226,000 on the platform and, as a result of its distinctive combination of hardware and software for at-home exercise, became one of the most sought-after businesses by investors.

Peloton is the next best alternative training system for staying fit and healthy if you don't have the time or money for a regular spin session at the gym. Since we started our first campaign on Seedrs two years ago, crowdfunding has significantly impacted LuggageHero's growth, according to Simon, a spokesperson for the company said

"We needed financial support from investors as a business to expand, and using Crowdfunding to do so was exciting and fulfilling".

He further stated; "Using crowdfunding websites enables more people to invest in your business because they may make donations of any size, making it possible for customers to join in on your purpose as well. As a result, more people were interested in following the company's performance and would tell their friends about it, increasing word-of-mouth investments as well".

MONZO

The founders of Monzo met while they were employed by Starling Bank and later launched the new bank in 2015 as an entirely app-based model. Monzo achieved the record for the fastest crowdfunding campaign in history by using Crowdcube, the equity crowdfunding platform, to raise £1 million in just 96 seconds. The business later raised £20 million through crowdfunding sites and was ranked as Crowdcube's third-best unicorn company for 2018 as a result.

BREWDOG

James Watt and Martin Dickie, two Scottish men, began home-brewing small batches of craft beers in 2007 because they had grown tired of tasteless beer. Less than a year later, Brewdog was established. When the company introduced Equity for Punks on the investment Crowdfunding website Crowdcube in 2011, it was guaranteed to be successful. Brewdog, one of the site's most popular unicorns today, raised a staggering £126 million during the campaign, setting a world record for equity crowdfunding.

FAQ 

Here are the responses to the top queries about crowdfunding, which is a growing alternative financing option.

Q: What distinguishes reward-based crowdfunding from donation-based crowdfunding?

A: Although they are occasionally mistaken for one another, reward-based and donation-based crowdfunding are two distinct crowdfunding approaches.

Reward-based campaigns must provide supporters with non-monetary prizes like goods, services, or experiences. They frequently employ the "All or Nothing" (AON) approach, which guarantees that all backers will receive a refund if the campaign falls short of its financing target.

Only initiatives managed by a recognized nonprofit organization or volunteer group are eligible for donation-based campaigns. Without expecting anything in return, backers donate money. These campaigns frequently employ the "Keep it All" (KIA) approach, which allows them to keep every dollar they get, even if they fall short of their donation target.

Q: How do I know which crowdfunding website to pick for my startup campaign?

A: The best way to know which platform to pick for your campaign is by first analyzing the nature of your business and the goals you set to achieve. Knowing that different platforms serve different purposes or are set to finance startups in specific niches, you can watch out for platforms like Indiegogo, Kickstarter, and SeedInvest among others that are borderless and also focus on helping startups in business and investment niches. So if your project idea is on music, art, or charity, you should not think of these platforms.

Q: Can I conduct a campaign simultaneously on multiple platforms for Crowdfunding?

A: Even while the majority of websites don't forbid you from publishing to numerous funding platforms at once, doing so can harm your campaign. The main issue is lost momentum because investors prefer to see you getting closer to your financial target. 

A project's momentum is diminished if it is posted on many websites since collaborators are dispersed among various venues. Additionally, you have a greater possibility of not reaching your target and losing all the funds you garner if you are on an "all or nothing" crowdfunding website.

Being on many platforms might potentially confuse backers and the press. Which website are you directing people to learn more about your initiative and donate to it? It is better to focus all of the media attention from the press and social media on a single fundraising campaign. 

Additionally, you are certainly aware of the effort required to promote, maintain, and update your campaign while you are raising money. A successful raise involves updating your content, giving updates, adding new videos, and sometimes even additional rewards. 

In light of this, how many websites would you truly wish to oversee every day?

Q: Must I post and solicit funds as a legal entity on Crowdfunding platforms?

A: Both yes and no are the answers to this. You do not need to be formed as a legal entity if you are crowdfunding using the contribution or reward models. These can be useful channels for putting ideas to the test. However, to take part in equity and lending crowdfunding, you must be a legitimate entity. The exception: You might apply for a loan as an individual on a lending website like Prosper.com or Lending Club, and then possibly use the proceeds for a business purpose.

Q: Can I crowdfund if I wish to keep the identity of my unpatented idea or product a secret?

A: First, before starting a crowdfunding campaign, you should apply for at least a provisional patent if you have any worries about this matter. However, depending on the product, you might be able to publish a campaign without disclosing the special features you want to keep secret, so you don't have to post precise illustrations of your idea. You can discuss the advantages of your product and the issues it resolves without going into specifics about the design.

Q: Why do crowdsourcing platforms scrutinize the projects that are posted?

A: Not all platforms for crowdfunding screen the projects that are submitted, but the majority do. On contribution and rewards sites, projects are generally scrutinized to make sure they adhere to the platform's rules and are appropriate for that specific site, not as a way to judge the merit of the concept. 

For instance, my business, peerbackers, wants to make sure you have a basic understanding of how to crowdfund as well as access to several social media platforms. I like to post on a website that evaluates and curates its content so I can be sure my project will be among quality submissions.

The present equity crowdfunding model requires businesses to examine projects for characteristics that would fulfill investors' expectations, like a strong team and market traction; typically, only a very tiny fraction of entries are authorized to publish.

CONCLUSION

It can be challenging to finance your entrepreneurial aspirations. Money doesn't always go as far as you expect it to, and loans to launch your firm come with stringent requirements like minimum credit scores and required collateral. Because of this, aspiring and even seasoned business owners prefer Crowdfunding. Through crowdfunding, potential investors are directed directly to your bank account. 

Your crowdfunding campaign will be hosted by websites like Kickstarter, Indiegogo, and Patreon for a charge, making it possible for potential investors to learn about it and donate. There arfewerss restrictions on raising money compared to getting a loan or finding investors in other means, and you may almost sell it as you want.