SA Crowdfunding Blog

Monday, 24 September 2012 13:16

How to use crowdfunding for business

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Until a few years ago, what did you do if you had a brilliant business idea and no bank loan? Perhaps you prayed for a miracle. And now? Well now… you simply crowdfund your business.

Known by many names- crowd sourced capital, crowd financing, and fan funding, crowdfunding is the savior of people with extreme talent but no capital. It is the latest buzz in the world of small entrepreneurship.

It is interesting to note that while the buzz is new, the concept itself is very old. One of the greatest musicians of all time, Beethoven, used crowdfunding to procure funds to compose and play. You, as experts will agree, have an obvious advantage over Beethoven- maybe not in terms of talent, but definitely in terms of opportunities available to you to make your sales pitch heard.

Are you still wondering about what Beethoven never had at his disposal, but you do? Well… the answer is: numerous crowdfunding websites.

So, if you have a brilliant business idea and are high on confidence but, unfortunately, low on cash, make use of online crowdfunding platforms to turn your dreams into reality.

Want to know how you can do this? Read on to find out.

Tips for using crowdfunding for business

· Choose the right platform

Choosing the right crowdfunding website is pivotal to your success. You must ensure that the platform you choose not only has a good pedigree, but also meets industry standards. The following questions will help when you seek an online platform for crowdfunding.

a. What is the success percentage of the website? Remember, not every posting gets funded. The higher the success percentage, the better the chances of you being able to gather sufficient funds via your sales pitch.

b. How reliable is the website? Experts recommend that you must use only reliable and trusted crowdfunding platforms. After all, you wouldn’t want a platform that could vanish into thin air anytime and leave you high and dry.

c. Does it meet all the regulations laid down by the law? Lastly, it is essential that the website you select meets all the legal obligations as per the laws of your country.

·Dazzle them with your sales pitch

Your sales pitch must be charismatic and convey the full potential of your business idea. Remember, the sales pitch is your only chance to tell your proposed investors that you, and your business, are worth their money. Grab this chance with both hands and make a powerful impact with your sales pitch.

· How much equity to offer

In crowdfunding, the equity model is perhaps the most common one of them all. When using this model, there is one thing you must calculate beforehand: how much equity are you ready to sell? It’s true that it is difficult to fund a business on your own, but experts say that you must try your best to retain as much equity with yourself as you can.

This advice is also good for entrepreneurs who are seeking investors for their existing business. Most business-planning experts state that you must not offer more than 10% of equity of your existing business.

· Ask your loyal customers to be the first donors

Whether you raise money for your company through conventional means or new ways such as crowdfunding websites, one thing remains common: not many people will queue up to be the first donors.

An excellent and pragmatic way to resolve this issue is to ask your loyal customers to be your first donors. Your loyal customers know you well and are more likely to believe in your potential than strangers. As you perhaps may have noticed, this tip applies only to existing businesses. However, entrepreneurs looking for funds for their new projects need not worry. They can ask their friends and relatives to be their first donors. Others are more likely to tread when they see a few have already walked the path.

With crowdfunding, the road to prosperity is within your reach. Use it to create your own symphony on your own terms. Good luck!

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Ben

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