How to Start a Crowdfunding Website for Your Business?

The Securities and Exchange Commission (SEC) recently announced that it had increased the amount companies can raise via ‘Crowdfunding’ in any 12 months from $1.07 million to $5 million. This five-fold increase encourages more companies to participate in the idea of ‘crowdfunding’ and gives individual investors more opportunities to participate in the company’s growth overall.

What is Crowdfunding?

Crowdfunding platforms offer alternative ways to raise money for your small business. You require reaching a funding goal and present the underlying business idea in ways that attract angel investors and other similar backers.

Crowdfunding is a significant step forward in the democratization of ‘startup’ investing. Companies mostly need more than a million dollars to get off the ground. More companies may view ‘crowdfunding’ as a viable and powerful fundraising source.

Why Do ‘Startups’ Fail?

‘Startups’ fail due to a lack of funding when it is required. It is challenging to raise money from venture capitalists or angel investors, and it requires more than simply having a good product. Another reason why these fail is because of product-market fit.

How Does ‘Crowdfunding’ Raise ‘Startups’?

You might have a great business idea. You might also know how to raise money from a handful of investors who also think that it’s a great idea. But if you scratch the market, you don’t find any need or desire for the product you endorse. Companies can solicit feedback from a more extensive and diverse group by raising money from several individuals. Bringing in your investors, friends, family and colleagues to have a financial stake in a ‘startups’ success will enable them to ‘vye’ for the company’s success.

How Do Increasing Limits Benefit Investors?

Every investor must diversify at some point – irrespective of public markets, private companies, real estate, or crypto-currency. Higher limits result in increased participation from a more extensive set of companies, allowing investors to spread the money they allocate for such investments across more companies.

Successful investments in startups generate positive and healthy returns. A successful investment has the potential to return the invested amount multiple times. Every investor doesn’t need to return, but a bit of return can make up for all smaller ones. It’s best to bet with more number of companies around.

How Does ‘Crowdfunding’ Drive Investments?

Crowdfunding effects and stimulates the stock market. Many ‘startups’ rely on crowdfunding campaigns as it is a very niche instrument for acquiring funds. A large number of public offerings involve crowdfunding platforms. Risk-taking involves intuition. If it brings gains, it becomes a whim of the market, and this trend continues. The dynamic growth in ‘crowdfunding’ has become a global trend. The maximum value of offerings will rise. This means of acquiring capital will be formally regulated, and the financing limit will increase substantially. This scenario also facilitates venture capital funds to look at ‘crowdfunding’ in a more favourable light.

Types of Crowdfunding

There are four main types of ‘crowdfunding’ are:

• Based on donation – People give money to a campaign/company/person for nothing in return. If you create a crowdfunding campaign to purchase tools or machinery for your factory setup – the individuals who donate money does it to support your business and nothing else.
• Based on debt – It involves peer-to-peer (P2P) lending. It is when the money pledged by backers is a loan and must be repaid with interest by a deadline.
• Rewards – It is when the donors receive something in return for their donations. Such rewards vary in size, shape or form.
• Equity-based ‘crowdfunding’ allows small businesses and ‘startups’ to give away a portion of their business in exchange for funding. It is also a type of investment where participants receive their share based on how much money they contribute.

How Does Crowdfunding Work?

If you are a small business and wish to traverse from a ‘startup’ to the stock market, ‘crowdfunding’ is the way to go. It creates opportunities to build investors’ trust without expending the effort and resources required for the complicated procedures of stock market debuts and IPO’s. Here are three tips to get set go:

• Act Responsibly – If you put your money into a business through ‘crowdfunding’ – you should have the same access to information as if they had bought shares in an exchange-listed company. (Quarterly reports onboard activity)
• Select the right partner – Select the right consultant to help prepare the offering, and provide support with public relations, presentations, and building investor relationships.
• Select the right crowdfunding platform – Check the ongoing campaigns created on a given platform in the past and whether contact with investors is possible during the campaign. Examples – Beesfound, Crowdway, Indiegogo, SeedInvest and StockAmbit.

In short:

1. Create a compelling plan
2. Validate your idea
3. Decide what rewards users will receive on achieving goals
4. Promote your ideas using channels
5. Select the best platform to post your project
6. Receive your money

What Do You Need To Know Before Starting A Crowdfunding Platform?

Crowdfunding is when there are many investors for a project or business. Later receive the necessary boost to cash flow to get their venture off the ground. It mostly happens online within pre-decided time frames. They set a target for raising a particular amount of money.

What type of business financing do you require at this time?

• A Business loan
• Cash advance against credit card income
• Loan for equipment purchase
• Equipment lease
• Commercial mortgage loan

Crowdfunding rules

Most crowdfunding sites have specific rules. Some don’t allow equity crowdfunding. Ignoring any of the listed rules can let you plummet the success rate.

How to Start a Crowdfunding Website?

• Share your vision and strategy while creating a crowdfunding campaign.
• This information indicates to potential investors what the business offers and helps them understand its value.
• Craft your business campaign as a mini-business plan, using aspects of a complete business plan.
• Start with a bullet point summary highlighting the business problems, ideas, values that you need to address.
• Make a compelling story to attract your audience that could lead your idea to fruition. Consider making a video presentation.
• Make an executive summary for your business idea highlighting major points and value propositions.
• Provide marketing and strategic direction about how you plan to take it forward. It demonstrates brand awareness to the potential investors.
• Also, share how you plan to generate leads and convert them into revenue.
• Highlight your team’s expertise on your business perspective and what should attract your crowdfunding audience.
• Offer your business launch timeline to your anxious crowdfunders.
• Offer perks to investors
• Align your business (mini-plan) with the crowdfunding platform’s requirements (content limit)
• Leverage relevant components of your business plan for an upcoming crowdfunding campaign.

Challenges of Creating a Crowdfunding Platform

You require investments and funding to support your business idea. In-absence-of direct investment support from financial institutions, business owners can access crowdfunding platforms. But it is not a straightforward process. These are laden with challenges:

• Finding a perfect pitch that appeals right investors

• Urging someone to invest in your business can be tricky. They know nothing or little about your offerings and credibility.

• All crowdfunding platforms are not univocal. It might appear the same on the surface, but their service offerings might differ. To save time and resources, look for the types of businesses they have served and gained success. Look for active campaigns, the number of visitors they get, how much it costs to run a successful campaign, read their terms and conditions.

• Getting potential contributors can be difficult when you start with a clean slate. To top it, making it exciting enough for them to embrace it might require some hard work. Maintain your identity and reputation. Take as many steps as you can to own the initial stages and get yourself in the line of sight of potential investors.

• Protect your idea to gain a financial advantage. You must protect yourself pre-emptively by copywriting parts of your business idea and sharing only the relevant information. Add a non-disclosure agreement and enlist the advice of a lawyer if necessary.

• Calculate reward for the investor and plan for fulfilment – The sweeter the incentive, the big is the investment. So think accordingly. Do not over-commit and decide what is reasonably doable.

Best Examples of Crowdfunding Organizations

Here are the best four crowdfunding platforms that you can use for your business:

• Kickstarter is a rewards-based donation platform
• GoFundMe is a donation-based crowdfunding company
• LendingClub is a debt-based crowdfunding site
• Indiegogo is a reward-based platform

How Do Crowdfunding Websites Make Money?

Crowdfunding platforms collect a portion of whatever the entire project raises. The business owner who raises the funding creates a page or shares the details with the organizations. This portion of the money comes as:

• Commission/Success fee – The crowdfunding platform receives a percentage of the money raised.
• Membership fee – It allows fundraisers or campaign owners to subscribe to your platform at a monthly fee.
• Paid services and features on the website – It supports campaign runners in – (1) campaign management, (2) creates a prototype, (3) publishes video advertising, (4) branding with appealing messages.
• Advertisements and promotions – You can allow fundraisers to use your platform to promote their campaigns and get a certain amount of money as fees.

How Much Does It Cost to Start a Crowdfunding Website?

The overall cost to create a crowdfunding website requires including the following features. These form the core of the website. Also, consider web design, web development, web hosting and payment engines.

A simple crowdfunding project may cost around $1000 to $1500 for a web platform.

A complex crowdfunding project may cost around $8000 to $15,000 for a web platform.

Conclusive

Konstant Infosolutions is excited about the increase in ‘crowdfunding’ and for self-directed retirement account holders. The ability to easily invest in worthy start-ups combined with the ease of using available funds means more investors will have access to a large selection of companies, leading to a better overall outcome. Hire web developers to create a crowdfunding website!