If you own a startup or an expanding business, we can guarantee that at some point, you may have thought of doing a crowdfunding campaign. Maybe because someone you knew raised an obscene amount of money on Kickstarter for a creative or charity project.
From an outside perspective, crowdfunding looks pretty stressful— but like most things, that’s because the devil is in the details. However, this is what crowdfunding can do for your business:
1. You’d get to know your audience better
Who is the target of your campaign? Do you want to appeal to youngsters, women or an older demographic? Knowing your audience makes some big business decisions a lot easier.
In addition, you get to know what your audience would appreciate as rewards for donating to your business. For example, if you want to appeal to people who are already familiar with what you do, branded merchandise or rewards would work. For new donors, find rewards that a wider range of people would enjoy.
2. You’d be sharing your story
As with any type of fundraising, you need to give your potential donors a compelling reason to give. Rather than make them wonder why they should donate at all, fill that gap with your story.
Crowfunding also requires you to tell your story in different forms, to different venues. You start, of course, with the main campaign page, which usually features a video and text describing your campaign. Altogether, this means that you have to be able to convey your story in a few words, but you also need to be able to expand it to several paragraphs.
3. You’d be building long-term support
Setting up a schedule or prompts to send your donors updates throughout the campaign, would help them know what’s happening on a regular basis. Did you just land your 3rd donor? Give him or her a shout out! Let your supporters know about it!
In 2016, equity-based crowdfunding was banned indefinitely in Nigeria by the Securities and Exchange Commission, but donation, reward and lending-based crowdfunding are still legal. However, besides equity-based crowdfunding, which may be particularly risky, here are three other major models to consider:
- Donation-based
- Reward-based
- Lending-based
1. Donation-based crowdfunding
This works on basic philanthropy, where people give money towards a good cause, expecting nothing in return. Most established charities coordinate this through their websites, but crowdfunding platforms can be useful for small organizations and people raising money for specific charitable causes.
This crowdfunding model is specifically designed for social or charitable projects, or those who raise money for charities, to enable them donate to a project. Homegrown donation-based crowdfunding platforms like and are worth considering for this.
2. Rewards-based crowdfunding
It is exactly as it sounds –everyone who gives you money, receives a reward based on the amount they invest. They have no financial stake in your company, only the expectation that they’ll receive what they were promised.
It could be small gifts like tickets to a show, a book, or the first edition of a new product by your company. What is important here is that the gift is a tangible item, a one-off deal, and of perceived value. For instance, if you have a tech idea, you would not want to pitch it to a group of senior citizens, unless it was one geared toward them. and are great reward-based crowdfunding platforms.
3. Lending-based crowdfunding
This model makes it possible to give a financial return on investments (ROI); a pre-defined interest rate can be shared with investors. Here, funders receive periodical payments until the whole investment is repaid. The simple goal is to have investors get money back on their investments with interest.
It almost works as traditional banks. Based on the amount of money, duration, product and performance, both parties can mutually agree on the return on investment (ROI).
Whichever model you decide to use for your startup, using the power of the crowd to develop and fund your business idea is a great way to build network, develop your brand, and grow your business.
Are planning on starting a business? Did these tips help? Share your thoughts!
