293368_SM_SDC_Blog_Crowdfunding

Looking for capital? These days, finding a cash outlay for your business endeavors can be as simple as setting up a crowdfunding website. Popular sites like Kickstarter and Indiegogo have changed the way businesses seek investors, making it easier than ever for companies and contributors to connect. Better yet, crowdfunding eliminates some of typical conditions investors often impose in return for their support, such as a stake in the company or creative control.

Kickstarter is an online fundraising platform that allows users in the U.S., U.K. and Canada to publicly post creative projects, including specs, prototypes, potential risks and progress updates, to grab the attention of investors. Be aware the Kickstarter requires users to set a monetary goal and deadline, and if the full amount of requested funds isn’t pledged by that date, the company does not receive anything (and any pledged money is returned to the donors). Indiegogo, meanwhile, is broader in scope, with a longer list of eligible projects and an international user base. Both Kickstarter and Indiegogo apply a percentage-based fee to the total funds collected, and Indiegogo’s fee increases if the fundraising goal isn’t met. While Kickstarter and Indiegogo are the best-known crowdfunding sites, businesses may also consider a variety of other similar services, such as 33needs, Rockethub, appbackr and ChipIn.

Ready to crowdfund? Keep these tips in mind.

  • Have a great product or idea to pitch. With thousands of crowdfunding campaigns ongoing at any one time, your business or product idea needs to stand out. Scroll through crowdfunding sites to be sure you aren’t duplicating an existing campaign.
  • Set realistic goals. Remember, you’re trying to get your business or product off the ground. Don’t ask for more than you need to cover your costs at this stage of the game.
  • Plan the perfect campaign. Think about the kind of customers and inventors who would comprise your target audience. Are they social-media savvy? Do they like a straightforward approach or a pitch with an edge? Can you reach out to popular bloggers to help promote your campaign? Consider these points as you write your copy and add additional media, such as photography and video.
  • Be open about your goals. Investors need to know that the business they’re contributing to stays true to your proposal. Reassure interested parties and investors with regular updates during the crowdfunding process, and welcome their feedback. If your business gets successfully funded, it’s even more important to continue the conversation and let your investors know how you’re using their money and what they can expect in the future.
  • Consider rewards. Crowdfunding businesses may choose to reward investors at certain levels with public acknowledgement, products and other incentives, which may help encourage participation. However, many incentives ultimately cost in you time, money or both, so carefully weigh whether rewards are a financially responsible option for your campaign and your business.
  • Watch the clock. If your crowdfunding campaign has a hard deadline, you’ll want to space out content over the life of the campaign. Still, the first 48 hours can be the most crucial. Plus, if you manage to raise the needed funds early on, your campaign may catch the attention of mainstream media, which can bring you needed publicity.
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