Crowdfunding: The Agile Way to Raise Startup Capital for Your Business

So, you have a million dollar business idea and looking for a mass collection of funds through investors or donors or both, but wondering how? Before you proceed, read this comprehensive guideline to avoid common pitfalls of crowdfunding and make it a highly successful campaign.

In a simple term, 

Crowdfunding is an umbrella term that involves a large number of individuals - crowd to raise money for a startup, business project or charitable cause to finance the business venture.

A story of Joey Simon

Joey has an idea to build new and exciting virtual reality world to attract the general public of various interests and background in paid skill gaming. In short, he wants to build a high-quality virtual economy and an excellent marketplace.

The game would include significant key features which are vital to provide employment, business opportunities and money circulation in the world of economy. The game will also expand into the general VR space by creating VR products and services such as virtual concerts and events. The organization will form business partnerships with other VR firms.

Joey put his money to work and build a prototype. It turns out well. Still, there were some modifications and improvements, before he can commercialize his product to the market.  

Next what?

Fortunately for Joey, crowdfunding websites like Indiegogo, Kickstarter, Crowdfunder, Chuffed and many more websites exist. Such websites help to raise business capital, which requires to complete a project.

Joey can make use of Kickstarter to raise capital and expand production. Joey set the fundraising goal to say $5, 00,000 in 120 days. Anyone who comes across this platform and likes the idea can invest and be part of the project. There are chances that raised money can exceed the goal, but the condition is Joey will only receive the funds if he fulfills the goal.

But, the question here is, does anyone wants to invest in Joey’s virtual reality world startup idea?

An honest answer in one word is “no.”

Joey initially approached various investors to raise the capital, but investors could not find the idea viable. So, Joey just altered the concept, create a promotional marketing video and approached the Kickstarter crowdfunding platform.

I hope Joey’s story will give you a more comprehensive understanding of one type of crowdfunding. Let’s dig into the detail.

The Best Crowdfunding Platforms

The credit goes to the internet for the enormous crowdfunding investment opportunities, and the traditional fundraising method is now completely outdated. Crowdfunding is gaining huge popularity because of its easy and cost-effective nature. Another reason it is popular because the campaign asks for smaller amounts of contribution from individuals and as it is a collective approach to the cost of marketing and advertising is automatically reduced. Twitter and Facebook are renowned social media platforms to promote crowdfunding campaigns.

The best crowdfunding sites,

• Kickstarter
• Indiegogo
• GoFundMe
• Crowd Supply
• Crowdfunder
• Experiment
• Chuffed

The best element of crowdfunding is it is formed on the open market where savvy investors are looking for fundamentally innovative, promising and viable ventures to invest their money wisely.

Types of Crowdfunding

Equity-based Crowdfunding

Equity-based Crowdfunding is one of the renowned types of crowdfunding, which works best for growth-focused organizations where a contributor invests some money in exchange for a share in the company’s stake. In return for share, the contributor becomes the part-owner in this process. Contributors receive a small piece of equity in the company itself.

Crowdfunder and AngelList are the most common and popular equity-crowdfunding platforms in the United States. There are other popular platforms like CircleUP, EarlyShares, Fundable and more. There are three different types of equity Crowdfunding. Start-ups and entrepreneurs use this type of crowdfunding campaign as an alternative to traditional venture capital.

Donation-based Crowdfunding

The name indicates exactly what you might be thinking. It is a type of campaign where the person or company runs the funding campaign to raise capital that is purely donation based and typically used to raise money for a personal campaign or medical bills. The purpose behind the donation-based crowdfunding is to support the idea or cause. This type of crowdfunding does not give any rewards just like rewards-based crowdfunding.

Generally, donors donate amounts between $1 to $5,000, but sometimes more. Crowdrise and GoFundMe are the most popular donation-based crowdfunding platforms 

Rewards-based Crowdfunding

Reward-based campaigns allow contributors to invest in a venture for non-financial benefits. This types of funding campaigns are in the form of a product or a service, and it is most commonly used for creative projects. In reward of investment free gifts, movie tickets to an event or some free vouchers are being offered. Once the organization secures a funding goal, rewards are being issued to the contributors.

Indiegogo and Kickstarter are the two most popular rewards-based crowdfunding platforms. A standard rewards campaign promises of between 3 to 8 items and at least three levels of pledges.

Debt-based Crowdfunding

Debt-based Crowdfunding resembles traditional loan structure. It provides investors an opportunity for financial interest on their investment. These types of campaigns are popular amongst start-ups who do not want to give up equity or want to provide access to traditional types of loan facilities. Debt-based crowdfunding campaigns allow entrepreneurs to raise funds in the form of a loan over a pre-determined timeline with a set of interest rate.

Contributors to these campaigns are not investors or backers but just lenders. The contribution is not offered in exchange for equity but is a loan that is required to pay back with the principle and interest. A bank is also an option, but borrowing from a collective individual is easier to secure, and the rate of interest for the loan is also lesser in the compassion of the bank.

An Agile approach

We are a globally renowned Agile software development company, and we make use of Agile methodology when it comes to undertaking development projects. Separately, we have been crafting expert fundraising strategy to help contributors achieve better results. Fundraising model is transparent and similar to Agile, thus so we are calling it Agile Fundraising.

An agile approach to fundraising is to provide operational functionality on projects. Agile emphasizes testing to learn and understand data as it helps to lower the risk in major operation rollouts. Following this methodology, we can respond to the changes in terms of requirements, better and faster than before.

Recently, our developers attended a fundraising conference where the idea of “what if we fail” was discussed. They learned that failure is the key to success and to grow, it is required to fail. Agile allows us to learn from our mistakes and understand as well as over-come from obstacles. In order to be more effective at Agile, planning is indeed required. Along with planning empowered staff and skillful expertise foster accountability to achieve more significant efforts. There is a lot to talk about agile fundraising and how to be more agile though I feel that an agile approach to fundraising will help entrepreneurs and small business owners to satisfy the expectations of their contributors.

Top 3 Crowdfunding Campaigns

All or Nothing

The all-or-nothing campaign works on a condition. If your business meets the fundraising goal, then keep the funds else relinquish the fund. So ensure to keep your expectations realistic.

Keep It All

This type of campaign will retain the invested funds if your business does not achieve the fundraising milestone.

Just Giving

These campaigns have no time limit to reach fundraising goals. These campaigns let you harness the power of the crowd with one central hub for all of your contributors.

Now you have completely understood all the types and categories of crowdfunding so let me help you understand how to paint walls to make the space look bigger.

Create a Social content calendar: - The first thing that you have to take into consideration is ensuring that the campaign stays in the public eye. To fetch the new investors, engage existing investors with your campaign.

Niche blogs and online forums: - Encourage customers to engage in conversations about your campaign. Reward them for their efforts.

Start local: - Popularity begets popularity. Use your network of friends, family, business associates, relatives, and anyone to spread via word-of-mouth.

Before you even start building your crowdfunding page, Start building a crowd first - Roy Morejon

Crowdfunding is all about approaching the right target audience. There are investors out there who want to be a part of such projects on a very personal level. Start by simplifying your business plan and refine it with a pleasant elevator pitch. All you are required to understand is “what people are lacking with that you can offer.” This will help you precisely build your campaign to engage investors and catalyze your business through crowdfunding.