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Is crowdfunding a feasible option for businesses?

If you don't fancy going through the banks, are struggling to find a suitable grant or can't find a loan that's right for you, then crowdfunding might be the answer. Crowdfunding is a great way to get the cash together for a new project, and is often used by businesses to get their idea off the ground.

What is crowdfunding?

Crowdfunding is the practice of funding an idea with a ton of small investments; using a website like Kickstarter or Indiegogo to 'pitch' a project to the community. Most sites will ask you to decide on a funding target, as well as a deadline. People can then invest in your idea, donating as much or as little as they want. Some sites will require you to hit your target for investors to be charged; others will allow you to keep whatever is donated, whether you meet the target or not.

Is it better for start-ups, or established businesses?

Both! It's often used by smaller start-ups or others who might struggle to find a suitable business loan, but it can be a good option for established businesses too. Crowdfunding is a great way to drum up support for your latest enterprise, or create some buzz around your product. It's also a good way to test the water with potential customers and find out how the public respond to your idea.

So, where do I start?

First, find the right site for your idea or project. Kickstarter is ideal for creative enterprises, Indiegogo may be slightly better for entrepreneurial projects. There are crowdfunding sites which are designed more for businesses looking for capital, like Crowdcube or Seedrs. You'll want to take into account the community for each site, and which is more likely to take to your product.

Then make sure you read the small print and legal jargon. The terms and conditions will differ wildly from site to site, and it's important to go through it all carefully. Decide whether you're better with a fixed or flexible funding target; some sites offer both, but sites like Kickstarter require you to meet your target by the deadline to receive any money backers have pledged.

Find a creative way to pitch your idea to get people excited about your project. This could mean creating multimedia content like photos and videos, or establishing a strong social media presence to get conversation going. 

Look at similar projects on the site, scope out the competition and find out which marketing strategies people are responding to. For some sites you might be asked to provide an incentive to backers; this could be the finished product, a voucher or even equity. 

Before you launch, you could try to secure a proportion funding from investors. Then when you do launch your idea, your fund isn't sitting at zero waiting for that first backer.

Is this the right option for my business?

Crowdfunding isn't something to enter into on a whim. Businesses and start-ups should give it the same amount of careful consideration they would a loan, grant, or any sort of funding. Successful crowdfunding requires a lot of time and energy creating content, updating your site and using social media to keep people enthused about your idea. If that sounds like a good fit for your latest project, then crowdfunding might be the way to go.

Not convinced? Check out our funding roundup for the latest grants available to businesses


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