Best Crowdfund options to Raise Capital for Startup business or project
Tags: Startup, Crowdfunding, Crowdsourcing, Money, Investing

Best Crowdfund options to Raise Capital for Startup business or project Honsby Orji May 22·4 min read

Do you have a new business idea or a project you want to embark, but lack required fund to kick off? You are not alone on this!

Most project ideas or startup businesses usually begin with high hopes and investor confidence. Comprehensive research conducted by experts has shown exceptional project ideas and business startups often capitulate due to a myriad of reasons within the first year. A few circumstances can either make or mar the crystallization of any business startup or project ideas.

The obvious requirement for any project to limelight or prosper is nothing short of capital. This is because capital is the basic ingredient for any business to thrive. Without adequate finance, business startups tend to crumble, and this malignant obstacle often causes infant business startup owners to seek financial backing for their startups.

After you must have conducted the right market data analysis research for your startup, obtaining the required funding for your business is entirely up to you. A lot of unicorn ideas die at this stage due to lack of or inadequate funding.

Here are a few tips on the procedure you can adopt, in order to source for the required funding for your startup adopting crowdfund approach.

Crowdfunding simply refers to the practice of raising money or accepting donations for a project, venture or cause through a large number of people, typically via the internet. It’s basically a form of crowdsourcing and alternative finance strategy. Individuals or small businesses can take advantage of it to get early-stage support for their ideas.

With Crowdfunding non-profits, charities, politics, clubs, schools, teams, churches, and other causes can raise money online from friends, family, colleagues, donors, and other supporters via email, Facebook, Twitter, LinkedIn, Google, and social media networks.

To run a successful crowdfunding campaign, you need to capture the attention of a large number of backers and convince them that your project is worthy of their investment. By receiving the necessary boost to cash flow, these ventures can get off the ground or launch new projects, have set time frames for when money can be raised as well as disclose specific monetary goals.

Types of Crowdfunding

There are four different types of crowdfunding: donation, debt, rewards and equity:

Donation:

Donation-based crowdfunding is when people give a campaign, company or person money for nothing in return. Let’s say you create a crowdfunding campaign to purchase new equipment for your company. The individuals who give you money do it out of support for the growth of your business and nothing else.

Debt:

Debt-based donations are peer-to-peer (P2P) lending, which is a form of crowdfunding. In debt-based donations, the money pledged by backers is a loan and must be repaid with interest by a certain deadline.

Rewards:

This is when donors receive something in return for their donations. The rewards vary by the size of the donation, which incentivizes higher contributions. Based on how much money participants give to a campaign, they may receive a T-shirt, the product or service — often at a discounted rate.

Equity:

While some crowdfunding campaigns don’t allow backers to own a portion of the company they’re supporting, equity-based crowdfunding allows small businesses and startups to give away a portion of their business in exchange for funding. These donations are a type of investment, where participants receive shares in the business based on how much money they contribute.

How does Crowdfunding Work?

How this basically work is that an individual identifies a crowdfunding website, makes a business or project pitch of their ideas, challenges, projects, or cause on the platform, shares his/her business model and it’s potential for growth to a community of investors or people willing to support their ideas or cause. If his idea is accepted and bought by the crowd funders on the platform, they’ll make a pledge to support his project model publicly and donate funds to get the business or project started. Modern technology has made it easier for people to share their problems on an interactive social platform.

Crowdfunding essentially creates public interest for your business, thus running some free marketing and providing finance for your business at the same time, eliminates the intricacies involved in placing your business in the hands of an investor or a broker and wields that power to simpletons on the crowdfunding platform with the potential to attract venture-capital investment as the business progresses.

As great as it sound, Crowdfunding can’t be said to be without its challenges. The heavy competition inherent in crowdfunding platforms can prove to be difficult if someone or people are pitching the same business idea as yours. If your business pitch isn’t as solid as your competition, then there is a probability that your business idea will be overlooked or rejected.