Crowdrise, crowdfunding site

The number of crowdfunding sites seems to have significantly grown over the past few years. Furthermore, crowdfunding sites have gained exceptional attention in North America as a result of the US Jumpstart Our Business Start-ups (JOBS) Act in support of entrepreneurship and small business growth. The USA JOBS Act is designed to encourage small business and startup funding by easing federal regulations and allowing individuals to become investors. Crowdfunding has also become popular in the UK, Canada and Australia.

So What is Crowdfunding?

The concept of crowdfunding is not new [as shown by the infograph below], however recently, it has gained exceptional momentum due to the social aspects of raising funds. Instead of traditional investors, ideas or causes are funded by the general public. Crowdfunding is the practice of funding a cause, idea, project, business or venture by raising money from a large number of people [1]. Today, these funds are typically raised via the Internet on crowdfunding sites. Crowdfunding has become a major catalyst in shifting the way small businesses source capital.

Crowdfunding profile and Campaign

Today there are a number of crowdfunding sites where you can submit your “pitch” in order to raise funds or donations. This is achieved by creating a profile on a crowdfunding site. The profile describes your idea, project or cause. Needless-to-say, the description must have good engaging content. When implementing a crowdfunding campaign, it is recommended that you:

1. Do your homework with lots of upfront planning
2. Ready your supporters by letting them know your intent.
3. Create your pitch with engaging content; also think about a 2mins video to support your pitch
4. Leverage your entire network across the social and email distribution channels.
5. Keep your audience engaged with updates and achievements in relation to your goal(s)
6. Deliver on your promise

Attracting Investors/Audience on Crowdfunding Sites

RockThePost, Crowdfunding site

When on these sites, your focus is pretty clear i.e. to raise funds. To succeed, your message, product, service or cause must be compelling and resonate with potential donors and/or investors. As a result, the purpose, value and rationale of your idea or project are crucial in order to build that following and ultimately, to attract those investors. Generally, each campaign has a goal where a target amount of money is to be raised, within a fixed number of days. Once the project is launched, the count-down begins and the associated funds raised are made visible. Generally, the most successful projects receive about 25-40% of their revenue from their first, second and third degree of connections in their network. This could include friends, family, co-workers and other social connections. Once the campaign gains traction,  new consumers start to take note to support the campaign. It is thought that there are three main reasons why new consumers engage, namely:

1. They connect to the overall purpose of the campaign
2. They connect to a tangible aspect of the campaign like the rewards
3. They connect to the creative display of the campaign’s presentation

Selecting Crowdfunding sites

As well as doing your homework as it relates to your pitch, it is also important to conduct your due diligence as it relates to the crowdfunding sites. There are associations that conduct crowdfunding site reviews that you may want to reference as part of your homework. As part of your assessment of crowdfunding sites, it is important to:

1. Evaluate the site’s investors~ ascertain the sites reputation in the industry
2. Evaluate the membership of the site ~ determine the quality of the projects on the site
3. Check the security of the transactions
4. Ensure you understand the legal documentation of the site

Crowdfunding Sites

Below, I have listed over 20 crowdfunding sites. Some sites have free memberships, only charging for transactional fees. Others require that you reach your goal and take a percentage of the funds raised. Some crowdfunding sites, such as Kickstarter, have an all-or-nothing philosophy i.e. if you don’t reach your goal, you don’t get any of the money raised. Others, like Rockethub, allow you to keep whatever you raise even if you don’t reach your goal. Hence the need to really do your home work prior to selecting.

In closing:

We certainly live in exciting times! It is predicted that crowdfunding and crowdfunding sites will explode this year. I mean, Kickstarter topped $300million in pledges last year! [4] Whether it does or not, this form of funding certainly provides a means for raising funds outside the traditional channels.

Have you run a crowdfunding campaign? Or are you thinking about it?

Thank you for indulging in my scripts!

Shirley

References

[1] What is crowdfunding and how does it benefit the economy? [Forbes]

[2] Crowdfunding sites reviews  [Crowdfunding Review site]

[3] Crowdsourcing.org 

[4] Kickstarter pledges tops 300 million in 2012  [Mashable]

[5] Tips for picking the right crowdfunding platform [Forbes]

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