Blog     03 Aug 2021   536

How to make money with Crowdfunding

The digital medium has made crowdfunding so much easier in comparison to the old days. As per reports, people have raised more than $34 billion worldwide using these platforms. If you are unaware of what crowdfunding is and how to make money with crowdfunding, you have come to the right place. Crowdfunding can be the best option for you to get the funds you need. We will explain everything about Crowdfunding in a step by step guide.

What is Crowdfunding?

Crowdfunding is the practice of funding a project or venture by raising small amounts of money from a large number of people, typically via the Internet. In simple terms, Crowdfunding is when a "crowd" funds a project or business, rather than one or two major investors.

Types of Crowdfunding

There are typically four types of crowdfunding which include Equity-based, loan-based, reward-based, and donation-based. 

Equity-based Crowdfunding

Small businesses or private investors earn a percentage of a company’s equity in exchange for their funding or investment. In simple terms, participants receive shares in the business based on how much money they contribute. If you have a bright idea and you are backed by Equity-based Crowdfunding now you can ground up your ideas as now you will have unparalleled access to capital to invest in new and developing businesses in ways you couldn’t before.

Loan Based Crowdfunding

This is a debt based donation or you can call it peer-to-peer (P2P) lending. Loan Based Crowdfunding eliminates intermediaries as the Lender and the borrowers can link directly through the internet. the money borrowed is a loan and must be repaid with interest by a certain deadline.

Reward Based Crowdfunding

As per Reward Based Crowdfunding, the donor something in return for their donations. The reward may vary by the size of the donation. This type of crowdfunding is attainable for startups and small businesses.

Donation Based Crowdfunding

Donation-based crowdfunding is basically a charity based donation where people don’t receive anything in return for their donations.

List of Popular crowdfunding Websites

  • Kickstarter
  • GoFoundMe
  • Indiegogo
  • LendingClub

Kickstarter - is one of the renowned rewards-based donation platform. The company's stated mission is to "help bring creative projects to life". Kickstarter is one of the largest crowdfunding sites for creative people. It has helped innovators raise more than $5.4 billion.

GoFoundMe - GoFoundMe is another well-known crowdfunding platform that is widely famous for charitable initiatives. Besides this normal businesses or startups can also take advantage of this platform. For any donations over $20, GoFundMe takes a 1.9 percent fee.

Indiegogo - It offers Fixed funding and Flexible funding. As per Fixed funding, it allows you to set a goal for a certain amount of money, and if you don't reach your target, all funds are returned to donors. The best part is Flexible funding where you get to keep all funds if you choose this option, even if you don’t accomplish your objective 

Lendingclub - It is a p2P (Peer to Peer) funding platform. It offers up to $40,000 in personal loans and up to $500,000 in small business financing. It helps members pay down high-interest debt, save money, and take control of their financial future.

How to make money with Crowdfunding?

Well, it's time to know how to make money with crowdfunding. Be practical and always remember that there is no magic recipe for making money with crowdfunding. You need to invest your time and efforts to achieve successful fundraising.

Best tips for money making with Crowdfunding

Know why you want the money

You need to be clear with your idea and your ultimate goal. You need to know how much money you need to raise to ground up your ideas. Be clear with every spending so that you can raise a fund accordingly. If your idea is great and has a success possibility, you can raise a good amount of money.

Work on donation collection strategy

Once you are clear why and how much money you need now you can move on to donation collection strategy. You should be clear with the primary benefit that your campaign will offer, the significance of that campaign, your targeted region or country, your competitors and how your idea is different, and at last which type of crowdfunding platform will you use.

Select crowdfunding platforms wisely

It is very vital to choose the right crowdfunding platform. As per your business model and requirements, you can go for either rewards or equity-based crowdfunding platforms. You should also know about the maximum money that you can raise through these platforms and the commission charges or the processing fees taken by these crowdfunding platforms.

Create your Profile

You should always have a prominent profile to attract Investors. Your profile should mention who you are? Why do you need this money? and how effective is your campaign?

Convincing Proposal

Write a very convincing proposal that will help you to attract donors. Your proposal should always include who you are? What your needs are? What do you want to achieve with this campaign? A powerful proposal will surely attract potential donors and it can also be used as a full-fledged marketing campaign to promote your project

Use Social Media

If you want to run a successful crowdfunding campaign it is very important to use social media platforms to advertise. You can use popular social media platforms like Facebook, Twitter, and Instagram to run your campaign. 

Be consistent with your campaign

It is very important to keep the people updated about your campaign. If you interact with the people personally and on social media, there are chances that they might donate if they like your idea. It is seen that Campaigns that provide regular updates to their followers raise 126 percent more money.

Conclude a campaign

Once the campaign is over, in some cases, you may get all the donations generated during the campaign if it is successful. While in some cases, if the campaign didn't reach its target amount, funds are returned to the backers.

Advantages and Disadvantages of Crowdfunding

Advantages

  • Provide access to a larger and more diverse group of investors
  • Best way to grow audience
  • The financial risk is little
  • You can test the market before launch
  • You can increase your brand awareness

Disadvantages

  • It requires a large amount of time and efforts
  • Success is not guaranteed
  • Potential for no too little gain
  • Oversaturated market

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Elizabeth Gold

Elizabeth Gold

Full-time Mummy | Part-Time Blogger

I love finding new and creative ways to make money. Anything to make life easier and to let me spoil my beautiful family.

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