5 Crowdfunding Sites to Help Fund Your Business
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What Are Crowdfunding Sites?
What Are the Different Types of Crowdfunding?
Donation-based crowdfunding With donation crowdfunding, people give money to a person, company, or campaign without receiving anything in return. For example, if someone needs an expensive piece of equipment for a mission-based startup, they might ask for donations to help them make that purchase. Peer-to-peer lending With crowdfunding model, also known as loan or debt-based crowdfunding, backers pledge money as a loan to help a company or campaign get off the ground. The loan accrues interest and has to be repaid within a set period of time. Reward-based crowdfunding With rewards crowdfunding, donors receive something in return for their donations. That can range from a discounted product or service to a branded perk like a t-shirt or coffee mug. Equity-based crowdfunding With equity crowdfunding, startups or small businesses give away equity or shares of their company in exchange for investment funding from backers. Usually, the more the backers give, the more shares they receive.
What Are the Benefits to Using Crowdfunding?
Access to nontraditional funding Entrepreneurs and small business owners may be able to get funds outside the standard sources and avoid the sometimes rigid requirements that accompany them. Sites are often user-friendly Especially with some of the more popular crowdfunding platforms, it can be easy to tell your startup’s story, feature compelling media and messaging, offer incentives and rewards, and have a one-stop-shop for potential backers to find you. A built-in brain trust Customers (and backers) are only ever a click or two away. This gives you the chance to call on them for feedback and ideas and field their questions, concerns, and complaints. This continuous communication loop creates a built-in brain trust. Added marketing and media exposure The more popular the crowdfunding platform, the more eyes on your campaign, and the higher the potential for press coverage and building brand awareness. This can help create buzz about your brand and build your customer base.
What Are Sites for Crowdfunding?
Massive marketplace with many users High visibility, exposure, and familiarity as a platform Transparent, all-or-nothing funding A massive marketplace means massive competition You can’t keep your funds if you don’t reach your crowdfunding goal Focused on consumer-facing products
Campaign creators have options to continue to raise money after a successful fundraiser Two types of funding options: all-or-nothing or keep-what-you-raise Charges competitive fees May not be the best choice if you do not have consumer products Large site with many competing projects If using flexible funding, you must ship rewards even if you don't reach your goal
Fees are competitive Connects you with a large network of investors Can start raising money in as little as 15 minutes Not a good fit for early-stage startups with limited experience Often need to bring 50% of funds from your own network Equity crowdfunding comes with complex rules and regulations
Offers a hands-on approach from staff during every step of the process Give you the option of reward-based or equity-based crowdfunding Minimal fees for successful equity campaigns Entrepreneurs with rewards campaigns don’t receive any funding if they don’t meet their goals Flat monthly fees can get costly for unsuccessful campaigners Charges a subscription fee that's required to fundraise
Helps creators crowdfund continuously Offers rewards-based crowdfunding opportunities and multiple subscription plans Keeps it light on the restrictions in comparison to other crowdfunders Some creatures have complained about issues in collecting funds There aren’t any built-in promotional tools Has received criticism for its customer service
Alternatives to Crowdfunding for Your Business
Small Business Grants Grants for small businesses can be a great way to gather funds for a product or project. Grants are lump sums that are awarded to a business or business owner by government, nonprofit, and corporate entities. Unlike loans, grants don’t have to be repaid, although they may have stipulations about how the money can be spent. If you visit Grants.gov, you can find a list of small business grants and search them based on a variety of criteria. Small Business Loans There are a variety of small business loan options for entrepreneurs and startups that need to borrow funds to grow their company. These include bank loans, Small Business Administration (SBA) loans, business line of credit, online loans, cash advances, and equipment financing.
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