How to crowdfund for a business startup
Crowdfunding is an excellent tool to launch ideas you want to get off the ground, with people able to contribute what they can so that you can get going in an easy, fast and safe way. It’s also a no-risk and easy way to get started and raise money for a business.
Knowing when to start crowdfunding for a business startup can be tricky though. Here we break down all there is to know about it and offer a comprehensive list to get you started.
Types of business crowdfunding
There are a few different types of crowdfunding that apply when looking at raising money to start a business. You could go with equity-based crowdfunding, where you offer donors a slice of your business. This can be good for attracting investors, but it means that you are forfeiting portions of your project. Donation based crowdfunding means people donate expecting nothing in return. This might mean it’s harder to attract business minded investors, however.
We break down the following forms of business fundraising for you here:
- Reward-based crowdfunding: Rewards-based crowdfunding offers neither debt nor common equity to the crowdfunders. Instead, a promise is given to offer a “reward” for the capital contribution
- Equity-based crowdfunding: Equity crowdfunding consists of selling a stake in your business to a number of investors in return for investment. The existence of equity funding is well established, with private equity, venture capital and angel investing long playing a role in developing companies
- Debt-based crowdfunding: Debt-based crowdfunding is a method of raising capital for projects or businesses that require funding. It is a type of crowdfunding where borrowers receive loans from multiple investors rather than just one lender
- Donation-based crowdfunding: With donation-based crowdfunding, individuals donate small amounts to meet the larger funding aim of a specific charitable project while receiving no financial or material return.
GoFundMe only offers donation based crowdfunding and you can read more about that here.
The pros and cons of crowdfunding for business
Before starting a business crowdfunder, it’s important to know the positives and negatives to doing so.
One huge advantage is you don’t need to give away equity in your business to investors. It’s also less risky than taking out loans.
However there is no guarantee that you will raise the amount of money that you need. It’s an exciting route to go down, but you are dependent on others in reaching your goals.
How to create an effective fundraiser for your business
When you’re starting a fundraiser for your business, it’s incredibly important to have a clear page explaining what you are raising money for, when you need it and any other details to inform and attract those who might want to make a donation.
Explain the business need clearly
The story on your crowdfunding page is a great way to announce why you’re starting a business, what your product or service is, and why you need an investment. When you’re writing it, try to get in as much detail as possible about what your idea is, what the purpose of it is and any plans on where you want to take it. Include information about any of the hard work you’ve done so far and any pictures or video that you can, too.
Be clear about your goals and budgets
Being clear about your goals and budgets is also useful to attract donors. Set a realistic target on your page and aim for transparency when it comes to where the money is going and how much you’ll need. It’s good to update donors on this as your business and fundraiser progresses too.
Include images and videos to engage donors
As mentioned above, pictures and video are excellent tools when it comes to storytelling. Use as many of these as you can in your crowdfunding description and updates to really illustrate what your startup is about and what you’re up to.
It can also be super helpful to include images that are relevant to your business. So this could be images of products, logos or premises. It’s good to help potential donors connect with the cause.
Treat your crowdfunder as a marketing opportunity
When you’ve launched a crowdfunder for your business startup, use it as a marketing tool. It’s important to be professional at all times on the page so making sure things are well written and polished is a must. And then it’s also important to spread the word far and wide about the page through social media. Share, share and share again on Twitter, Facebook and Instagram. There are some tips here on social media and crowdfunding.
Also consider sharing this in business-friendly spheres and communities, like Linkedin.
Acknowledge and thank your donors
An important step to remember for any sort of crowdfunding is to thank your donors. You can thank your donors on GoFundMe but sending an email or letter that is personalised is a lovely touch and may motivate people to donate again in the future. We’ve got some tips on writing a thank you letter here.
Successful business startup crowdfunders
So, you’ve decided you want to use GoFundMe to crowdfund for your business. Take a look at some previous successes here for a little bit more inspiration.
Fundraising for a vegan sushi bar
Zoe used GoFundMe to fundraise for her vegan sushi bar / street food dream. When the venue she usually traded at shut, she started this GoFundMe to raise money to create her own space. She initially wanted £3k but has so far raised more than £5k.
Help to start a coffee business
Eric and Candice met at a coffee trailer – and then thought they’d start their own. They started fundraising after some unexpected setbacks with equipment so they could buy a heater and a coffee brewer.
A new business and healthy journey
Fernanda started fundraising for her new business and journey after struggling with various health problems and getting a wake up call. After losing important jobs and clients due to ill health, she wanted to take a different route.
How GoFundMe’s donation-based crowdfunding can help your business startup
Using GoFundMe to crowdfund for your startup is a fast, easy and safe way to go about getting donations. Your page is easy to set up and easy to share when you’ve got other things on your mind – like getting a business off the ground! So start your GoFundMe today and get going.