Crowd funding - the practice of funding a project or venture by raising money from a large number of people who each contribute a relatively small amount, typically via the internet.
In this wonderful world of social media and online connectivity, the sharing economy extends to friendly support for business ventures. Funding supplied by the people, for the people.
We spoke to Story Box Library Founder Nicole Brownlee to find out her journey with crowd funding. Check out this smart Melbourne-based business to see this one clever business mum accessed much-needed funds to make her business dream become a reality.
Story Box Library is an online storytelling subscription site which required a complex website to manage its unique functionality and so Nicole kicked things off by crowd funding on Pozible to help raise the money she needed to pay her website designer – and launch.
There are two main types of crowdfunding: rewards-based, where people who agree to contribute specific dollar amounts are rewarded with small incentive gifts to mark the magnitude of their donation; and equity-based crowdfunding where people agree to contribute funds and end up as a shareholder in the business.
It’s important to talk to your lawyer and your business accountant to decide which one will work for your business.
Don’t be fooled into thinking crowdfunding always works, though – it doesn’t.
There have been some spectacular fails from disorganised business people who have created dodgy videos to promote their crowd funding vision, and then receive nothing in return because their request for money was too large and their business model deemed too dubious.
When the crowd judges you, expect to be scrutinised very closely.
Different crowdfunding platforms also require close examination.
With so many to choose from, including Pozible, Kickstarter, Indiegogo and more, some are better suited to creative industries, such as book publishing or film-making, while others cater for innovation, invention and research projects.
No matter what crowdfunding platform you prefer, the importance of a professional and authentic pitch is critical. Your aim is to capture the online attention of a busy person and get them to understand the value of your vision – and why it should be supported.
Need help practicing your Pitch? Join one of Mums & Co's online Practice Your Pitch Sessions.
For potential investors considering your funding request, it’s not always about the value that you’re offering the world but more about what’s in it for them. What will the benefits to them be if they choose to support – and share – your project? Look at other successful crowdfunding campaigns to see what rewards were offered and what attracted positive responses. Learn from the positive experience of others who have gone before you and use this information to put together a perfect pitch proposal.
They say charity begins at home and when it comes to kicking off a successful crowd funding campaign, your friends, family, colleagues and clients are your best resource. If they care about you and your vision and you have pitched your value well, they will be your first supporters and will also help share it with their networks of friends, family, colleagues and clients.
For equity crowdfunding, supporter engagement more often means having important and notable stakeholders around the company online around the campaign and represented. This includes the entire team, advisors, board members, partners, and existing investors. Sites like Crowdfunder.com make this easy by displaying this important ‘social proof’ of your existing investors and team right alongside your investment offering online.
Crowdfunding platforms are not listing services.
No matter what platform you choose, the results your campaign gets are directly related to your ability to pitch your proposal well – and how you market it to grab the attention of interested investors.
Historically, successful crowdfunded campaigns have had tens – and sometimes hundreds – of planning hours put in behind the scenes, creating marketing strategy, promotion and the actual video pitch.
To find out if crowdfunding is right for you, it’s important you understand the work involved – and the potential gamble of not receiving the funding you require.
It is also smart to speak to your lawyer and your accountant about the compliance issues around receiving this type of funding and your responsibility to use the money in the way you have promoted.
For businesses who use it successfully, the results can be life-changing. As with anything in business, research is critical. Sometimes, things aren’t always as easy as they look.
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The information contained on this web site is general in nature and does not take into account your personal situation. Where appropriate you may need to seek professional advice from a financial adviser.