The basics of crowdfunding

Crowdfunding is a way to raise money for your business, giving you access to thousands of potential investors. We spoke to Crowdfunder to find out how it works.

Crowdfunding can be great for businesses – whether you have the spark of an idea that you want to turn into reality, or you are a more established startup looking to expand or invest in business improvements. Whatever the reason you need funding, crowdfunding can help you find it.

Crowdfunder works with thousands of people to raise millions of pounds with the power of the crowd. Gay Hayler, from Crowdfunder, explains how it works and provides his tips for success.

What is crowdfunding?

Crowdfunding is a way to raise money, awareness and support for your business idea or project, from the people around you. It uses the internet to talk to thousands – if not millions – of potential funders who get ‘rewards’ in return.

Anyone can set up and benefit from a crowdfunding project

It just takes three simple steps:

  1. Create a simple project page on our site, explaining your idea
  2. Next, tell all the people you know and ask them to share it with their friends, associates etc.
  3. People who believe in your idea will pledge money in return for a reward that they’ll receive if your project succeeds.

Crowdfunding has more benefits than just raising funds too:

  • Validation – Crowdfunding validates your business idea and gives you confidence, it proves that people like your idea and will pay or contribute to make it happen. 
  • Funding – You can unlock other funding – this could be grants, business loans, investors or a precursor to an equity crowdfunding campaign.
  • Advocates – Crowdfunding is for life, not just for fundraising. The people who support you and your great idea become a part of your journey and make incredible ambassadors for your project in the future. 
  • Marketing – When you create and launch your project you have to really think about how you are going to market your idea. So Crowdfunders learn new skills when fundraising – they learn how to best position their messaging, reach new audiences and become even better marketer.

What type of businesses crowdfund?

All types of businesses use crowdfunding to raise funds. From food and drink businesses, to tech startups, to charities, to medical research projects. Just take a look at some of the current projects crowdfunding with us right now.

Top tips for crowdfunding

  • Be clear about how much you need to raise and why. Help the crowd understand what you need the funds for and how this will help your business, your team, the community and so on, in the long run. Will you be creating new jobs as a result of your successful project? Will you be able to reduce waste? List all the benefits!

  • Assign a team. Use the people you have around you to help and make sure your project succeeds. Assign roles to each team member and build a core team of two to five people.

  • Create a video: Projects with videos are twice as likely to get funded. Keep it short, speak directly to the camera and be clear.

  • Encourage people to pledge by giving great rewards. Offer at least five rewards. Try to think of ‘money-can’t-buy’ rewards and ask your network what they would like to see as a reward to help with ideas.

 

So what are you waiting for? All Xero for Startups members are entitled to a £100 pledge for all projects which raise over £2000. Join Xero for Startups now to claim this offer.

 

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