Crowdfunding for Business: 5 Things You Need to Know Before You Start Collecting
With the right type of fundraising, any small business idea can come to fruition. That’s what makes crowdfunding so attractive.
Crowdfunding for business is a smart way for entrepreneurs to collect the funds they need to launch a concept.
A crowdfunding campaign is an excellent marketing tool. It introduces the mission and vision of your brand as it materializes. Also, these types of funding platforms work in tandem with social media.
They draw traffic from users in different markets to your website and social pages. As a result, you build a follower and customer base in the launching process.
If you’re looking for a great way to get the funds your business needs fast, you need to read this. Check out five things you should know about crowdfunding for business.
1. There’re Different Types of Crowdfunding for Business
Although the base idea of crowdfunding is the same, they are different types with regulations to follow.
3 types of crowdfunding include:
This is a lending-based type of funding. Entrepreneurs get monetary assistance through peer-to-peer lending and invoice financing.
You promise givers something in exchange for financial support. For example, the legendary R&B group TLC decided to make a farewell album in 2015.
Instead of going the traditional route with a record label, they launched a Kickstarter campaign. The campaign was a rewards-based campaign strategy to help fund making the album.
In exchange for support, fans got early access to some cool perks. If they gave between $5 and $5000, they either received early track listings or a slumber party with the TLC.
This is where investors give you start-up money in exchange for equity in your business. You basically give them a small percentage (ownership) of your venture.
Before you start collecting funds through crowdfunding, know it’s regulated by the government.
The U.S. Securities and Exchange Commission regulates sanctions for small business crowdfunding.
- Funding must happen online via an SEC-registered intermediary, funding site, or broker.
- You cannot exceed more than $1,070,000 in funds in a 12-month calendar year.
- Investor contributions have limitations that are also confined within a 12-month calendar year.
- You must file information disclosures to the SEC and investors.
All this happens under the SEC’s Regulation Crowdfunding.
3. Trademarks and Copyrights
If you don’t want to lose it, copyright and trademark it before you put it on a crowdfunding site. That goes for brand logos, images, service marks, audio, and video content. If you value your artwork, protect it as well.
Make it clear by using symbols that prove your work has copyright or trademark protection.
4. Top Crowdfunding Sites
There are hundreds of legitimate crowdfunding sites online. But not all of them fit every individual small business funding need.
Stick with sites that are familiar and have a positive reputation.
These sites show up on a consistent basis across social media and different search engines. They have successful reputations and offer greater exposure for your startup idea.
5. Pros and Cons
Hands down, crowdfunding can help you pull in a lot of capital and catapult your biz in a big way. lt also connects you to upstanding people like other successful investors.
Investors are smart business people who’ve been in the business world for a long time. They can offer tips for success and longevity.
Unfortunately, crowdfunding is also hit or miss. If your idea has zero appeal, it won’t draw givers or investors. And because the process takes time, you could end up wasting a lot it if the campaign doesn’t work out.
Don’t give up your bright idea because your bank account is at zero. There’s plenty of money online.
Crowdfunding for business is a springboard for financing marketing. Get your idea together, get online, and start collecting for your new venture.