Any entrepreneur has to decide the question: where to get the amount needed to implement the project?
Of course, you don’t always need money to start your own business. Many start a business “on the knee”: they create websites, organize sales via the Internet. Opportunities are full now.
But without investment, it will still be difficult to break through to the top and implement a project that is useful for people. Often the expenses are more than we can handle: rent (for a website – hosting), production costs, taxes, interest to distributors, and so on. Now you do not need loans or long negotiations with different people to collect the required amount, because there is crowdfunding (Russian sites are still gaining popularity). What it is? Now we will understand in detail.
What is crowdfunding?
Crowdfunding is raising money for a business or social project by attracting finance from strangers. The word “crowd” fits perfectly here, because a social group is a collection of people in which people know each other. And the difference between the crowd is that there are no social ties here.
Key words on this topic: donor (one who injects money) and recipient (author). The main condition for the collection is that all finances must go towards the realization of the described goal. Crowdfunding for personal needs is also possible, although not as popular as in the case of a business. For this purpose, there is a website gofundme.com.
- In order to raise finance through crowdfunding, you need to decide on a clear goal that will need to be voiced. Moreover, it is necessary to designate not only the project itself, but also in what time frame it should be implemented.
- Limitation. You can not attract more money than originally indicated. The same applies to the period during which money is invested by random “passers-by”. The site administration does this on purpose in order to separate interesting ideas from bad ones.
- Category can be any, although some sites impose restrictions. So, some of the sites for collecting money are created for creative projects, and business cannot get here. Others are intended for both entrepreneurs and ordinary people creating social projects. On some sites you can collect finances for politicians.
- Venture. This means that there are no guarantees of a return on investment, an entrepreneur must understand this.
- The one who collects the money is fully responsible for the result.
History of the development of crowdfunding
Crowdfunding started in 1997. Then the fans of the Marillion group decided to finance her tour throughout the United States. Managed to collect 60 thousand dollars. Although at first the group itself did not participate directly, this model was used to record several albums released later. So crowdfunding appeared first in the music field, and only then went into business, politics, and so on.
The first crowdfunding site for music was called. ArtistShare, and was established in 2000. In 2002, the mob fundraiser expanded into the film industry. But then this sphere was only developing, in contrast to the present. Young entrepreneurs actively use platforms like KickStarter (it was created in 2009) to create their products and implement their ideas. For example, the video game project Wasterland 2 raised more than three million dollars in 2012.
Why do we need crowdfunding?
Crowdfunding is a convenient tool for turning an interesting idea of a person into reality. Also, by raising funds, it becomes clear how much this or that idea is interesting to the masses. Therefore, crowdfunding can be used for marketing and sociological research.
The question is, why find out the needs of people? And all because their implementation is the main task of the business. Those novice entrepreneurs who believe that the purpose of their own business is to make money are mistaken. Of course, this is an important factor. But more and more often they say that the product should not correspond to the costs, but pay them back. Simply put, a phone that you sell for a thousand dollars should deliver at least 1500 joy. This is called the WOW effect. You should always do more than what is expected of you. At least try.
So crowdfunding, in addition to practical assistance in achieving goals, also helps to determine whether people need your product. There are two main reasons why you need to collect people’s money. Together with the world – a naked shirt!
Benefits of crowdfunding
- You don’t have to work hard to earn start-up capital. If the idea is worthwhile and you can promote it, then people will help you. Yes, you become obligated to them, but the ability to take responsibility is the main quality of an entrepreneur. And if you want to earn at the same time, the terms are reduced many times.
- Market analysis. Something that marketers must do. If money does not give or write negative comments, then there is something to improve in the wrapper or the “candy” itself. Thus, you will significantly save time that was previously required for marketing research. Profitable, isn’t it?
- PR opportunities. After all, every person who has invested money in your idea is already waiting for its implementation. There is such a marketing technique as a pre-order.
- Opportunities to get big funding. Not every investor is ready to allocate several million for an idea. But if you collect money through crowdfunding, it becomes possible. And all because we often underestimate the little things. But they play a huge role.
Where can you collect the most
Here are some popular destinations. But just because they raise a lot of money doesn’t mean your idea can’t be realized. But here are some popular destinations:
- Startups. This is a project that has only recently been created. However, it is not entirely clear what “recently” means. Typically, the maximum startup time is a few months. Further, the idea receives support, the necessary investments, and therefore can already be called a young enterprise. And if it doesn’t, it closes. Crowdfunding (it is just developing in Russia) is one of the types of support.
- Creative projects. It can be movies, music, books.
- Ready-made enterprises. After all, successful and established companies can also implement new ideas, right? Why not get support from outside.
Crowdfunding for business is quite young, but experience has already been gained. If you take it into account, you can collect much more money than not knowing anything. Here are some simple guidelines:
- Create a group on social networks. Many do not pay enough attention to this point. But in vain. After all, the presence of a promoted group in social networks (or at least an informative one) is an extra signal “we can be trusted, we keep our word”. In addition, activity on VK or Facebook will attract an additional contingent that does not even know about the existence of the platforms.
- Be specific when requesting. Many startups are afraid to say directly that they want money, despite the purpose of crowdfunding platforms. Therefore, they write something vague like “support the project”. Man by nature tends to do the bare minimum. Therefore, he will support the project with a like. If the repost does, it will be generally cool. Therefore, say something like “support the idea with a ruble”.
- Avoid rewards that are too generous. Crowdfunding platforms provide an opportunity to thank people for donating to support an idea. Moreover, the more they gave, the more valuable the present is provided. But this is a mistake. People will still give a little money, according to their strength. And you will only throw gifts in vain, because if a person has invested, it is already foreseen that he likes your project.
- No project launches on Saturdays, Sundays and holidays. The fact is that these days, rarely anyone will go to the site. Someone can go to the cinema with the family, someone will play on a computer or phone or use social networks.
- The launch needs to be carefully planned. One way to find out the necessary information before starting a project is to conduct a survey on social networks about how much people are willing to give. Then it will be easier to decide on the terms that are set. But it is better not to set too long a period. This may look suspicious.
Popular crowdfunding sites
Obviously, the most popular platform in the world is KickStarter. All the media write about this site. It was originally created for US citizens. One of the problems (or advantages, from which side to look) of this resource is strict pre-moderation. Thus, an unsuccessful project is simply not included in the list. That is, if your idea is accepted, then it will potentially already raise the required amount.
At the same time, citizens of Russia and other countries cannot use the kickstarter. You need to be a US resident. Another thing is Indiegogo. This platform was created before kickstarter, and here you can use a regular bank card or PayPal electronic payment system. A huge advantage of this platform against the backdrop of a kickstarter is that the money is issued even if the entire amount has not been fully collected in the allotted time.
If you have a scientific or creative project, then the RocketHub system is for you. The notification of your campaign is carried out through social networks.
What are the prospects?
This topic is quite complicated, since even scientific papers write about the prospects and argue in academic circles. In general, the potential is great, and projects can correct many social problems. For an entrepreneur, this is also beneficial because there is often no need to turn to banks and investors, getting into large debts. Simply put, there is demand from entrepreneurs.
And what about ordinary people? Of course, our mentality is far from charity. But every year this situation is getting better. As a last resort, if crowdfunding does not work (although there are no prerequisites), then crowdinvesting is a pretty good thing. This is a close topic, but here the remuneration is paid on a mandatory basis.
Fundraising is a fairly effective strategy if used wisely. Do not forget about competent PR of your idea. Without it, it will not be possible to convince people that it is worth investing hard-earned money in your idea.