Finding a business loan in the current economic climate can pose a real challenge to those potential entrepreneurs who have a poor credit history or little business experience, but crowdfunding offers a great alternative to traditional bank loans.
It is estimated that crowdfunding has so far boosted the global economy by $65 billion and created 270,000 new jobs.
Credit report experts, Credit Angel analysed crowdfunding successes to uncover the common themes.
Here are five simple steps to a successful crowdfunding campaign:
The ideaJust like any new business, crowdfunding needs a unique idea. To get your entrepreneurial idea, look for a gap in the market or an every day problem that you could solve.
You will need to test out your idea before sitting down to write your pitch. Ask family members if they think it is a good idea and carry out surveys on social media to see if there is enough interest to make starting a crowdfunding campaign worthwhile.
BudgetingBefore you can start your Kickstarter campaign, you need to know how much money to ask for.
When estimating the costs of a crowdfunded business there is a fine balance to be had – you do not want to run out of money, but you also need to raise the full amount to get the funds.
Things to consider when budgeting:
Emotional pitchThe big difference between applying for a business loan and using a crowdfunding website, aside from keeping the money, is that many donors will be interested in investing in you as well as your product.
A bank is interested in the mechanics of the business; how likely it is to work, how quickly you can pay back the loan and how likely you are to make repayments.
Backers browsing a crowdfunding website are interested in finding people who would not otherwise be able to start a business, or someone with a cool idea that they would love to have access to.
Crowdfunding is far more emotive than traditional fund raising. If you have a personal connection to your proposed business, then consider sharing this on your crowdfunding page.
A study by the University of Stanford found that the most successful crowdfunding campaigns included these things:
Truthful titleRather than trying to excite potential backers with a salesy title, use a simple and concise name for your project instead. Rather than trying to use the hard sell, simply come up with a strong product name and explain what you are trying to do in as few words as possible.
There is a clear trend on crowdfunding sites that those with complicated titles which do not explain what the project is about are the least successful. Do not keep the audience guessing and do not use an excessive number of adjectives to describe your product or project – let the great idea speak for itself.
Committing to the campaignCrowdfunding campaigns can be challenging. They are usually condensed down to thirty days and in that time, you will need to be consistently posting on the project page and sharing on social media. It can feel like really hard work.
However, it will be worth it and if you do not work flat out throughout the campaign period, then you might not raise the full amount and the entire amount raised will be lost.
Commit to the campaign and spend as much time on it as you can while it is live. Plan the timing of the campaign before you write your pitch and make sure that nothing will get in the way of making the most of this fantastic opportunity to start your own business.
Find out more about the most successful crowdfunding projects.
By Hannah Bullimore, part of the team at Credit Angel
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