The Power of the Crowd
Crowdfunding Basics & Models
We are a marketing agency that is focused on launching products through crowdfunding, we have found in our work that lots of people have heard of crowdfunding but they don’t really understand what it is, therefore this blog is designed to help identify if crowdfunding is right for your business.
What is crowdfunding?
Crowdfunding is a tried and tested way of raising finance for businesses by essentially asking a large number of people to support you through (usually) financial contributions that help you reach a target amount. Through crowdfunding, you can use the internet to talk to thousands – if not millions – of potential funders.
In 2015, it was estimated that worldwide over $34 billion was raised this way and the World Bank Report estimates that by 2025 global investment through crowdfunding will reach $93 billion.
It offers a genuine alternative for financing a business to traditional methods and is particularly appealing for retail businesses that are looking to launch a new product.
So, is it right for you?
Most products and services are suitable for crowdfunding in some form and depending on the crowdfunding model it can provide you with a unique cocktail of market validation, pre-sales and capital investment that fuels business growth.
The most successful campaigns tend to have the following characteristics:
- Products and services that are focussed on selling to consumers rather than to other businesses.
- The company or team behind the campaign has a proven track record in the field or industry that they are launching the product in.
- That the product or service is genuinely innovative and brings real added value to the marketplace.
- Has a fully engaged network of individuals or advocates that support the product or service.
What are the main types of crowdfunding?
Equity: This is a type of crowdfunding where investors commit an investment amount into the company in exchange for a shareholding. The world’s largest equity platform is based in the UK and is called Crowdcube.
Reward / Pledge: Investors receive a ‘reward’ for investing money in the organisation. This can be in several forms – physical or non-physical. It may include a free gift such as a t-shirt or e-book, a discounted price on a product yet to be launched or a once-in-a-lifetime experience.
Debt-based: Investors buy long-term bonds in an organisation in exchange for favourable interest rates on repayments. Bonds are often 3 to 5 year agreements.
Charitable Donor: A donation to a community project, charity or not-for profit organisation.
Are you interested to find out more?
Crowdfunding is a market in flux and subject to the changing trends of investors and consumers. We have been involved in the industry from 2012 and can help you to understand if Crowdfunding is right for you, and if so, what kind of Marketing plan you need to put together to execute a successful campaign.