Funding your entrepreneurial dreams or startup can be challenging for those just starting. Money sometimes doesn't always take you as far as you imagined it to, and loans to kickoff your business often have many requirements such as minimums for credit scores and required collateral. That's why utilizing crowdfunding techniques for your business is favorable among aspiring and even experienced entrepreneurs. Crowdfunding techniques, if done right, can draw interested investors straight to your bank account.
Online platforms like Indiegogo, Kickstarter, and Patreon require a fee for your crowdfunding campaign to be hosted, allowing potential investors to learn more and contribute. In addition, you can gear the campaign almost any way you like, and there are fewer strings attached to raising funds compared to obtaining a loan or gaining investors in alternative ways.
There are three types of crowdfunding to be aware of:
- Reward crowdfunding: allows you to entice donors with services or products to reward their contributions. Utilizing these rewards can, in turn, attract more attention to your business. Something to keep in mind is that to raise a large amount of money, and you need a massive donor base.
- Equity crowdfunding: use this type of crowdfunding to offer ownership shares in your company in exchange for funds. Here, there is no need to repay loans that are more costly to your business, but funding these pitches requires a lot of info about a company's operations.
- Donation crowdfunding: this type allows you to solicit donations that are smaller from a larger amount of contributors. A pro of this type is that donated capital does not need to be reimbursed; however, these donations can be lower than funds from other sources.
Knowing these three types are helpful to steer you in the right direction when choosing the best method for your startup idea.
Check out the infographic below to explore more tips from experts on crowdfunding for businesses and pointers for creating a campaign for crowdfunding and regulations to be aware of during the process.
