In most world economies, businesses and entrepreneurs are having a tough time securing funding for their projects or ideas. Banks are wary about lending to any perceived risk ventures, and most venture capitalists are not investing. Because of this, many small businesses and entrepreneurs have had to look elsewhere for funding, one of these options available is crowdfunding.
Crowdfunding, crowdsourcing or social funding is the act gathering funding from a group or network of people, using the Internet as a source. Crowdfunding was initially used by fans of bands to help fund albums and concerts and from there has evolved into one of the most popular ways to secure funding or support for ideas.
How crowdfunding works
Crowdfunding is centralized around a number of websites where both potential investors – anyone who has money or likes an idea – and entrepreneurs with ideas communicate with each other.
If you have an idea, you post it on the website with as much information as possible. Many investors are out there looking for ideas first, if they like your idea, they will want to know more about it. Many people with ideas will use visual mediums to gain interest. Most importantly, they set an amount of funding needed, usually based off financial investment projections. To encourage investors, it’s recommended that you offer a reward based on the amount of money invested. It could be the product itself, discounts or anything really.
As crowdfunding relies on websites, a number of websites have sprung up to meet needs. Here are our top 3 sites:
- Kickstarter. Kickstarter is the most popular crowdfunding website, focusing mainly on creative projects. Projects have a start and end date, an accountable person and definable expectations that all investors agree to. The interesting thing about Kickstart is: projects follow an “all-or-nothing” approach, if projects don’t meet the set goal, they don’t get funded.
- Investedin. Investedin is a website that caters to individuals and companies that would like to host fundraisers, or raise funds. It’s similar to Kickstarter in that projects generally offer rewards for investment, but differs in the fact that it can be used for any kind of fundraising, including funds to cover capital expenditures.
- PeerBackers. PeerBackers is a crowdfunding site for anyone with a business idea, or a business in any stage of its life-cycle to raise necessary funds, and help make their idea a reality. Like Kickstarter and Investedin, PeerBackers follows the invest and reward structure, the main thing it does differently, is it’s mainly for getting funding for businesses, or business ideas off the ground.
While there are more crowdfunding websites out there, we feel that these three meet the needs of the majority of people. If you have an idea that you think other people would benefit from and would like to be a part of, give crowdfunding a try. Still unsure about the whole process? Contact us, we may be able to help as well.