Five Things Entrepreneurs Should Know About Crowdfunding

More than 500,000 new businesses start each month.^* Many of these businesses are launched using personal savings or bank loans, but modern technology has given entrepreneurs a new way to raise funds: crowdfunding. Instead of using your own money or taking out a traditional loan, crowdfunding gives you the means to raise money from friends, family, and even strangers. Starting a crowdfunding campaign on one of the numerous crowdfunding sites is easy. The hard part is getting the campaign to be successful. If you’re thinking about starting a business with crowdfunding, here’s what you’ll want to know.

There Are Three Kinds of Crowdfunding

1. Perks-based
   When you engage in a perks-based crowdfunding campaign, you are essentially asking for donations. However, you reward each donation with a perk. For instance, for a $100 donation, you might send out a coffee mug with the company logo, while a $5,000 donation might earn the donor a face-to-face meeting.

   

2. Loan-based
   Loan-based crowdfunding gives you the ability to circumvent traditional banks and take small loans from a wide variety of people. You can set up your crowdfunding efforts so that you pay 0% interest, or you can set rates and terms like you would for most other types of loans.

3. Equity-based
   Equity-based crowdfunding allows you to sell pieces of your company to investors. This is a new form of crowdfunding and is subject to SEC regulations,^† so make sure you understand the rules before choosing this option.

You Won’t Go Far Without a Clear Goal

You wouldn’t seek a small business loan without a business plan, so don’t start a crowdfunding campaign without one either. Crowdfunding has changed the way you can raise money, but the steps for forming a successful business remain the same. You need to have a clear sense of what your business will do and how it will be profitable. Additionally, you should take the time to identify your crowdfunding market. If you don’t know who would bother giving you money, you still have work to do.

The Platform Can Make All the Difference

Not all crowdfunding sites are created the same. In fact, they can be quite different. Before choosing which site to use, you should do research to determine what platform will give you the best chance for raising the funds you need. Look for sites that have hosted crowdfunding for companies similar to yours. Then look into whether those efforts were successful or not—and why.

You Have to Market Your Efforts

If people don’t know you’re raising money, people won’t help fund you. That seems obvious, but it’s easy to fall short of your fundraising goals because you failed to spread the word. Make sure you have an active social media presence and that you use both traditional and new media as much as possible. Additionally, you should produce materials for your site. Videos, PDF brochures, regular posts, and even Q&A sessions can help convert someone who’s mildly interested into a donor. Don’t stop marketing until you’ve reached your fundraising goal.

It’s About More Than Just Raising Money

A good crowdfunding campaign raises as much awareness as it does money. This is important, since funding your startup is just the first step. After you have the funds to get going, you have to turn the business into a success. A good crowdfunding campaign can make lots of people aware of your business before it even launches, increasing the likelihood that you’ll have customers in your earliest days.

How Else Can You Improve Your Chances of Launching a Successful Business?

Being an entrepreneur requires plenty of vision—and lots of knowledge. Before you start a crowdfunding campaign, you might want to earn an online business degree in administration or finance. In an online business degree program, you can not only learn the skills to help you become a successful entrepreneur, you’ll be able to take advantage of online education’s flexibility and convenience. You can earn your degree while still working at your current job, and you can save yourself both time and money.

Two beneficial online business degrees you can earn are a Doctor of Business Administration and an MS in Finance. Online DBA and online finance degrees are both popular among future entrepreneurs and can help you make the most of your crowdfunding campaign—and give you the tools you need to run a successful business for years to come.

Walden University is an accredited institution offering online business degrees. Expand your career options and earn your degree in a convenient, flexible format that fits your busy life.

*J. Nazar, 16 Surprising Statistics About Small Businesses, Forbes, on the Internet at www.forbes.com/sites/jasonnazar/2013/09/09/16-surprising-statistics-about-small-businesses/#7d7e4aa43078.

†S. Guzik, JOBS Act Crowdfunding Begins on May 16, 2016: Don’t Get Busted for Solicitation!, Crowdfund Insider, on the Internet at www.crowdfundinsider.com/2016/03/83470-jobs-act-crowdfunding-begins-on-may-16-2016-dont-get-busted-for-solicitation.

Walden University is accredited by The Higher Learning Commission, www.hlcommission.org.