The Best and Worst Advice Business Owners Have Heard About Crowdfunding

Now that we’ve given some tips to investors, it’s time to show crowdfunding project initiators and borrowers some love. First things first. Make sure you have differentiated your crowdfunding form.

There are three big sections within crowdfunding: rewards-based crowdfunding, equity crowdfunding, and peer-to-peer (P2P) lending. Rewards-based crowdfunding is the favorite for creative projects, from video games to novels. Through it, you post a project on a crowdfunding platform with a set amount of money to raise. You reward your backers in return with anything from the right to create a new character in your video game or a special short story emailed to them.

Equity crowdfunding is beloved by startup entrepreneurs. Here, you trade investors’ funding with shares in your budding company. Finally, in P2P lending, an online platform matches borrowers and investors. Borrowers take out a loan for working capital or other business necessities while investors who had collectively funded borrower loans earn interest-based earnings in return.

It is important to separate the three forms as it helps you choose which crowdfunding platform to utilize. With that out of the way, on we go to our dos and don’ts!

Do your research

This should be mandatory advice when embarking on any new venture. Specifically to rewards-based crowdfunding, learn the facts regarding your target audience. From the website Fundable, you will learn that the average donor is aged 24-35. More men back startups. Whatever your target segment, tailor your project campaign to them.

In any crowdfunding category, get your finances in order and figure out exactly how much money you need to ask for. The amount you ask for will be reduced by platform fees, reward costs (for rewards-based crowdfunding), and/or interest fees (for P2P lending). Do the math.

If you are a borrower at a P2P lending platform, it is especially imperative to check your finances. Can you afford to take out a loan? Also, look for a P2P platform you can trust and are comfortable with.

Do not wait to market your campaign at the last minute

For rewards-based crowdfunding, do some pre-launching. Create buzz for your project weeks, even months before it is launched. Make a blog. Use social media platforms like Facebook and Twitter to spread the word further. The idea here is to create anticipation so when your crowdfunding project is set up on your chosen platform, you already have an audience of likely donors.

Utilize your family and friends. Make them promise to partially fund your campaign to kick up some steam. If people see your campaign doing well, they are more likely to invest. Pitching to your nearest and dearest also has the added benefit of gauging their reactions. If even your closest relatives seem unenthusiastic about your project, perhaps you need to rethink your direction.

Be careful not to tell-all! Your brilliant idea might get stolen without proper copyright.

Do pitch a great story

Rewards-based crowdfunding is a romantic concept, isn’t it? Average people like you and me can make innovations and groundbreaking projects a reality.

Use that! People like to part of something special. And if you are starting a crowdfunding campaign, chances are you believe your project is special. Now you need to convince others how awesome it is! Do this by telling a compelling story. Be genuine. Be yourself. Tell your audience why you’re so passionate about your project and why others would want to be passionate about it too.

Appealing to people’s emotion is great, but don’t forget to back it up with facts. Breakdown how you will use the funds from your project. Be honest.

This is the time to be creative. Use gifs, infographics, charts, even prototype samples. Videos are possibly the best campaign medium. According to Forbes, videos double the success rates of rewards-based crowdfunding. Do keep your videos short and sweet. The general consensus is that videos under 3 minutes are best to capture attention and for social media shares.

Never keep your investors in the dark

Transparency is the key to any successful crowdfunding campaign. Keep your audience up-to-date on any new developments, good or bad. Being vague fosters dissatisfied or worse, angry investors. Digital media can be a double-edged sword and you can bet unhappy customers will air their grievances on social media. This hurts your image, your campaign, and your reputation.

Transparency applies to all forms of crowdfunding. Whether you are a lone project campaigner or a staff for a P2P lending platform, building trust is an essential key to any successful enterprise.

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