Guide to Crowdfunding for Startups and Businesses
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
What Is Crowdfunding?
When Did Crowdfunding for Businesses Start?
What Can Crowdfunding Be Used For?
10 Popular Crowdfunding Sites for Small Businesses
How Crowdfunding for Small Business Works
Creating the campaign Marketing the campaign Raising money with the intention of reaching the target goal. Some platforms require crowdfunders to reach their goal in order to keep any of the money raised, others do not.
Creating the Campaign
Marketing the Campaign
Spreading the word on your company’s website and social media channels. Using promoted posts on social media. Doing interviews for online blogs, podcasts, or other media. Attending conventions, business fairs, or local community events. Distributing flyers, pamphlets, or other promotional materials in your community.
Reaching the Target Goal
Different Types of Crowdfunding
Do You Pay Back Crowdfunding Money?
Regulations of Crowdfunding for Startups
Pros and Cons of Crowdfunding for Small Businesses
Pros of Crowdfunding for Small Businesses
It can be a great way to test the market. If you have a business idea but you’re not sure if the market will respond to it or not, crowdfunding allows you the opportunity to turn it into a proven concept. However, if your campaign doesn’t reach a lot of investors or supporters, then that may be a sign you need to pivot your business strategy and idea. The market finances your business or product. You’re not typically taking unnecessary risks with your finances. Instead, the market is taking most of the financial responsibility. It can create buzz and excitement about your product. A successful campaign will generate awareness and excitement over your business and product, which is time and effort well spent for many reasons. It can accelerate you past competition and years of struggle. It could help you raise more than you expect. Obviously, the purpose of crowdfunding for small business is to raise money, but it’s possible to raise more money than you originally requested. It’s rare, but it does happen for some businesses. This is why it is so important to put everything you have into your campaign.
Cons of Crowdfunding for Small Businesses
It’s not as easy as it sounds. It’s a lot of work to launch a successful crowdfunding campaign. It’s not as simple as signing up and telling people how much you need. For example, many successful campaigns usually end up spending money on marketing and getting a professional to shoot their video. YOU have to find a way to reach contributors. Whatever platform you use to crowdfund typically isn’t going to advertise your campaign or make sure it reaches the right investors. You may not get the money if you don’t meet your funding goal. With crowdfunding, you typically have to raise a certain amount of money by a certain date or you may not be able to keep any of the funds. Competition can be stiff. Depending on your industry and niche, you may have thousands of campaigns to compete against.
Alternatives to Crowdfunding
Small Business Loans
Small Business Loan Rates
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