The 7 Benefits of Using Crowdfunding Instead of Banks to Raise Capital and Awareness for Your Business

I got an email today that made me laugh.

It was from an online business called Crowdfunder.

It helps small businesses, sole traders, artists and anyone with a good idea to raise money for their project.

To do this, a business makes a little online pitch on their website about why their product or service is so great… then they offer rewards in return for investment.

Anyway, it was their subject line that caught my eye (worth stealing this one if you have an email list – in fact I stole it for today’s email!)

The 7 Benefits of Using Crowdfunding Instead of Banks to Raise Capital and Awareness for Your Business

Well, yes, I did have a ‘sec’.

So this was the email I saw…

The 7 Benefits of Using Crowdfunding Instead of Banks to Raise Capital and Awareness for Your Business

In other words…

A crowdfunding website is looking for crowdfunding.

Okay, maybe it’s not funny “ha ha” but I’m weird like that.

It goes to show that more and more start-ups are appealing to their followers, subscribers and customers to become part of their business.

To the point that even some crowdfunding sites like are asking for funding!

To be fair, the difference with Crowdfunder’s offering in this latest email is that you buy shares in their business.

Normally, you don’t have to do that. You simply need to offer pre-sales of a new product, or rewards, such as bonuses, gifts, special editions, VIP events and other treats.

But the principle is the same…

Crowdfunding allows you to reach out to an online audience – Social Media followers, email subscribers, blog readers – and get them to fund your business.

In return your funder will get:

• Official recognition (e.g. Their name on your website, in film or music credits or in a publication, public shout-outs on Social Media) – this gives them sense of importance, legacy and something to tell their friends and family

• A sense of co-ownership in your business’s overall cause (e.g. Showing how they are making something happen that wouldn’t otherwise) – this gives them a sense of being part of a community, promoting your vision, achieving your social purpose and improving their personal happiness or championing their passions)

• The product itself (e.g. Advanced, priority access to the product, service or website you’re creating as soon as it exists) – this assures them that they’ll get a guaranteed copy before the crowd

• Exclusive rewards (e.g. Signed copies, rare editions, extra downloads, VIP passes, event invitations or personal communication.)

What you’ll find with crowdfunding is that people will willingly overpay you for the product.

A book that you sell for £15 might raise £20 from backers who feel they want to support it – and get their name in the back, something that costs you nothing.

Famously, in 2015, the rap group De La Soul used crowdfunding for their first album in over ten years.

Their official target on Kickstarter was $110,000, but fans poured in $600,874 worth of funding.

More recently, in April 2017, Bluebird Tea Co secured £365k in under 48 hours from 289 investors on Crowdcube.

It’s something that you should think about for your business or new product.

7 big benefits of crowdfunding

The beauty of online crowdfunding is that it allows you to:-

• Test, finance and pre-sell product launches without big financial risk

• Get investment for ambitious projects that you’ve never be able to fund yourself

• Side-step the banks and more traditional funding routes that often require a lot of time, red tape and experience

• Create a strong, meaningful two-way relationship with your fans and backers

• Tap into the increasing dominance of Social Media and encourage sharing and viral marketing in advance of a launch

• Convert Social Media followers into email contacts. Once someone funds you, you can then contact them directly with news, updates and related products

• Set up a crowdsourcing project without having an existing business website or product! As long as you have a strong pitch and a great idea, you can raise the money

With crowdfunding you can rally people around your business, get a huge number of Social Media shares, build an email list, and generate a buzz about what you’re doing long before you even launch a product

What’s not to like?

5 crowdfunding platforms to try

The primary way to crowdsource online is through a platform like one of these:

Crowdfunder – this is the platform I’ve already discussed in ths email. They take 5% fee + VAT with a Paypal option (another 3.4%) or a method of paying only 0.5% with GoCardless

Crowdcube – this is more of an investment platform where you offer people a chance to buy equity in your business. Minimum investment is only £10 so it’s something any of your customers or prospects can take part in.

Kickstarter – This launched in 2009, with the UK version launching in 2013. Since then it has clocked up 1.2 million backers who spend an average of £53.80 per pledge. They take 5% fee of the funds collected, plus their payments processor will take fees of 3-5%. This is only if your project gets funded. https://www.theguardian.com/technology/datablog/2016/may/18/revealed-the-biggest-money-makers-on-kickstarter-uk

Indiegogo – There is a 5% platform fee and 3-5% per processor fee. Campaigns with bank accounts outside the US will also have a $25 bank transfer fee. If you’re a non-profit, socially minded campaign you can get a 0% fee platform.

Patreon – If you’re an artist, filmmaker, crafter or writer, this might be an option, as it allows people to become your patrons and give you money every month on a rolling basis.

Have a think about whether crowdfunding could be right for your next launch then check out these websites for more details.

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