In this article, Aradhya Vats who is currently pursuing Diploma in Entrepreneurship Administration and Business Law from NUJS, Kolkata, discusses how to raise funds for a business online?
What is crowdfunding?
The internet has some powerful tools through which you can spread your message. Be it a creative idea for a startup or a social cause. The social media and various fundraising websites help you pitch your cause to the world. A number of people might come forward to help you with funding if your cause resonates with their ideology.
Thus we come to the technique that works out very well when it comes to raising funds online- “crowdfunding”.
Crowdfunding refers to collecting small amounts of capital from a large number of people typically via social media and online fundraising platforms. The people are investors who might be friends, family or mostly complete strangers. There are a number of crowdfunding websites such as ketto, Gofundme, Indiegogo etc.
Crowdfunding is very different in its approach as compared to traditional forms of raising capital for your business. The conventional or traditional method requires you to prepare your business plan, do your market research and then pitch your ideas to a limited, wealthy group of investors and shop around for takers of your idea. This limits your audience tremendously. On the other hand, using crowdfunding, you are gaining a very wide audience base for your idea. The capital contributed by the individual people of a crowdfunding website might not be that huge, but your reach and scope is widened.
Given all the above advantages, how do you decide which crowdfunding platform to go for? Well, it depends on which one suits your needs. You design your online campaign accordingly to make sure you meet your requirements.
Steps to raise funds online
Have a clear goal in mind
Have a clear cut idea about what is it that you require funds for. It may be a social cause, an innovative product launch etc. but you will have to explain your idea to the crowd in each and every detail. The reason you chose the idea, what benefits it will serve if it transforms into reality, what is the expected time frame in which you will be able to implement your plan and so on and so forth.
Having said the above, you must also be clear that your goal is crowdfunding and not the traditional way of raising funds. Both of them have their own shortcomings and advantages. For example, the mentorship and advice you would get via traditional investors cannot be obtained through crowdfunding websites.
Have a well thought out price plan
It is better to assess that how much money you would require at each stage of your venture. And aim towards raising that amount of money. Any more would disturb your math and any less will have you struggling halfway through the implementation. There are some crowdfunding websites which insist that you keep a minimum donation cap. Sometimes they assist you in the same as well.
Otherwise, you can also try suggesting an amount to your audience.
You can also incentivize people into funding by promising takeaways to them. A small gift or token of thanks like a t-shirt or a key-ring would do. This works even better when you are asking donations for a social cause. In that case you may also try giving ‘impact-driven’ rewards. For example, baskets made by underprivileged children for whom you are running the fundraising campaign can be given to the people who make donations.
Choose a crowdfunding platform and a payment gateway:
There are a number of crowdfunding platforms available online. But each one has its own terms and conditions. Also, the platforms are famous for a specific niche. For example, Kickstarter is considered the best platform for creative and innovative product launches. Whereas Rockethub and Quirky are generally used for raising funds for websites, music albums, books and construction businesses. There will be some platforms that will help you build your campaign while others will not.
Some websites will charge you a percentage of the money you were able to raise, while others might charge a one-time fee. There are some websites which will not let you keep the money unless the amount is greater than the minimum you promised to raise from the campaign, while others may let you keep whatever money you raise.
Nonetheless, if you plan your campaign on a credible website, you might leverage the brand name of the platform and us it to give weight to your idea.
As far as payment gateways are concerned, paypal is considered the best mode of transfer. A paypal button can be added to your website or blog and can work very well for simple donation transfers. These days, new payment methods like paytm and mobikwik are also gaining ground and becoming popular among users.
A special note if you are raising money for a non-profit venture
Givlet or Causes are platforms that give funding to non-profit organizations and ideas. They do not charge a fee upon the money raised and hence one should keep this in mind while pitching a non-profit idea.
If you are a startup looking for funds, then approach startup-specific funding platforms like Crowdfunder. If your idea is creation of a mobile application then you must go check out “appbackr” which holds the niche when it comes to funding for startups that are app-based.
This goes back to where we starter from- choosing an idea-specific platform to gain maximum benefits.
Another point to be noted is that if you believe that social media is the best platform to market your idea then consider platforms like Givezooks, Qgive, StayClassy and Crowdriser. They will provide you with tools with the help of which you can propogate your idea on social media platforms in return for a small monthly fee.
Design your Fundraising campaign
In case you want to raise money for a non-profit venture or a charity then there are a number of strategies you can adopt to ensure that you reach your fundraising goals. Set a deadline for the completion of the project and publicize it. People get excited when they see the deadline approaching and this may drive them to give funds. Also make a group of supporters to strengthen your campaign. There will always be a group of people who would rally behind your cause. Hold them tight.
You can use Facebook, Google and Bing for marketing your cause using search engine optimization and similar techniques. You may design the content of your website in a way that it contains a lot of keywords. Hence your fundraising page or website pops up when users search for similar words. Make sure that you payment link is present everywhere, be it your blog or website.
Apart from social media marketing and search engine optimization, you can also use Email marketing, bulk messaging and other techniques. It would be better that you make some partners and collaborations to make this arduous journey a bit simpler.
If your campaign has to do with a product launch then the rule of thumb is to set up a niche- a specific target market of your product. You will have to provide your audience the complete tale starting from the idea to the stage of execution. Remember to carry out your work swiftly so that your investors or supporters do not lose interest in your project. You can also garner interest and attention of audience by advertising the product before its launch. This can be done by publishing blogs, websites, newsletter, magazines etc. Your backers or supporters can be kept engaged by creating a reward system too. You can design a reward system where your backers would get the product you are about to launch at a lower rate or with a special discount offer for lifetime. Such incentives should be kept in place to ensure that your backers have held their ground and not shifted their attention to any other product (or worse a competing one!).
The above simple steps can be followed if you wish raise money online for your idea.
Apart from crowdfunding, we also see innovative techniques coming up these days. For example, if you are a startup wishing to raise funds online, and would consider options apart from crowdfunding, then a platform like “Somolend” might interest you. This website helps you build you garner funds through a debt based system rather than a donation based one. This means that if you qualify for funding you get a loan to fund your startup.
All in all, you can feel assured that the online space offers you a wide variety of options to pitch or market your idea. Starting from crowdfunding to social media to debt-lending, there are a variety of methods and procedures to garner funds online. It all depends on you that how thoroughly you know your idea that you can choose the optimal method and platform for pitching it.
