Crowdfunding: raising money for a startup

Olga Nagornyuk
25.06.2015

Crowdfunding: raising money for a startup

Many interesting projects remain unfulfilled due to lack of funding. It is often difficult for start-up entrepreneurs to convince venerable investors and cynical bankers of the potential attractiveness of their business idea and to get funds from them for its implementation. Crowdfunding can solve the money problem.

Crowdfunding and the problem of money

The word difficult to pronounce came to us from English (“сrowd” - “crowd”, “funding” - “financing”) and literally means “national funding”. Its essence is best reflected in the proverb “From the world - on a string, bare - shirt”.

The meaning and features of crowdfunding

The meaning of crowdfunding is to collectively collect the funds necessary for the implementation of a certain project: the release of a book, the shooting of a film, the opening of a creative living room, etc.

You can use your own website / blog and social network as a platform for crowdfunding, when you are sure that the number of contacts will allow you to collect the necessary funds.However, experienced users are advised to use the services of special promoted sites, which we will describe later.

To post an announcement of your project on them, you need to understand what the features of crowdfunding are:

  • Clear wording of the idea. People give money for specific projects, not “for themselves” or “for the future.” Therefore, you should briefly and clearly state the essence of your idea and write a sum that allows you to put it into practice.
  • Limited Time limits for fundraising should be limited. In the same way, both you and the creators of the portal will see which project is of interest to visitors and which from their point of view is hopeless.
  • Multidirectional. With the help of crowdfunding, you can raise funds for creative or charitable projects that do not bring financial benefits, and for commercial ones.

Charity program

  • Venture Investors have a high risk of not receiving the “buns” promised by the author.
  • Donation. Transferring money to the project organizer, backers (contributors) do not count on return. In fact, we are talking about patronage.
  • Performance. For the money received, it will be necessary to report to the Beckers by posting a report on the crowdfunding platform. Otherwise, the funds will have to be returned - as a rule, such an item is present in the agreement.

Types of crowdfunding

Today there are the following types of crowdfunding:

  • Shareholder. Beckers who transfer funds to your business and do it on a long-term basis receive a percentage of your company's shares.
  • Debt Crowdfunding transfers are treated as borrowing in exchange for a share in your business.
  • Award. In this case, Becker does not expect a refund or a share in a newly formed company, relying only on some kind of reward. For example, to receive a disc with your music album, if you collect money for its recording, or a computer game, if this is your project.

Due to the specifics of the domestic legislation, the first two types of crowdfunding are not practiced here. Therefore, you have to rely only on the third option, good, it is the most economical, because the cost of the awards you can at least partially lay in the price of the project.

Crowdfunding scheme

The scheme of crowdfunding is simple. Consider it on a specific example. Suppose you are going to release a new computer game and create its account on the Internet. According to calculations, you will need $ 20,000. What are you doing?

Crowdfunding scheme

Choose a crowdfunding platform. With the review of the best of them, we will introduce you later. In the meantime, we note that only some of these resources work with business ideas. Most aim to raise funds for creative and charitable projects.

  1. Get acquainted with the rules of placement on the portal. They clearly stipulate the requirements for you as the organizer of crowdfunding and the content of the project.
  2. Fill out the application form and send to the site administration, after which its representative contacts you and concludes a cooperation agreement.
  3. Spread the announcement of the project, indicating the amount of investment and types of awards. In your case, you can offer a free distribution of the disc with the game or a discount on the purchase of an upgrade.
  4. Develop your own advertising campaign to attract potential investors.
  5. In the case of interest from users in your account, a sufficient amount will be generated, which will be transferred to you minus the intermediary fee.

Work schemes at home and abroad

Read also:

Abroad, the practice of raising funds for business projects is more common.Perhaps this is due to the presence of an appropriate legal framework that allows for the use of equity and debt crowdfunding options. In Ukraine and Russia, the crowdfunding of business ideas has so far taken only the first steps.

Practice shows: users are more willing to transfer funds to record new music albums than to open new commercial enterprises. Apparently, the negative experience of the existence of financial pyramids and the deceptions of depositors, which is why the domestic investor is not in a hurry to give money for the future, has an effect.

A classic example of successful crowdfunding is the Pebble smart watch project, launched using the Kickstarter platform. Their creator decided to synchronize the clock with the phone and display data on calls, SMS, etc. on the dial. Instead of the stated $ 100 thousand, the author of the project collected $ 10 million.

Smart watch

Rick Gripper, through the same Kickstarter, raised $ 11 million to produce a USB refrigerator with a built-in blender and a wireless speaker system.

Even presidents use crowdfunding. In 2008, Barack Obama collected over $ 272 million in this way to conduct his election campaign.

From the successful Russian projects, we can recall the successful attempt of the Bi-2 group to raise funds for the release of the album “Spirit”. The musicians promised the users as a reward free attendance of a closed concert and as a result they collected the necessary amount.

How to make a crowdfunding project a success?

What should you bet on by acquainting internet users with your business project and expecting them to respond in the form of transferring funds to your account?

Original idea

It should stand out against the general background, attract attention and arouse interest, otherwise you will not see the money. Oddly enough, people are willing to pay even for the most insane ideas, if only they were not fresh and trite.

Idea for business

No one will invest in the opening of the next flower shop, even having a non-trivial name, but the floristics training program may well win the confidence of the Beckers.

Business plan

Any commercial idea is successful when it relies on financial calculations. The business plan will help to calculate the final amount of the project. By the way, do not forget to include in it the costs of remunerating your investors (for example, distribution of software) and the commission of the crowdfunding system.

Reward

Depending on the type of business, gift coupons for services, discount certificates for goods, free CDs with software / games, T-shirts with the company logo, etc. can be used as a reward. Always fulfill your obligations to investors, build your business reputation, because perhaps this is not your last crowdfunding project.

Crowdfunding reward

Pay attention to the successful time of posting the announcement of the project. We recommend putting it out in the fall, when people come back from holidays and there is a surge in business activity. This will increase your chances of success.

Realism, Transparency and Promotion

Do not be fooled: today, to collect millions with the help of domestic crowdfunding sites will not work. Choose smaller projects, then the probability of collecting the required amount will be much higher.

The statistics of listings is recorded on the site itself, and you should be ready to answer questions from resource visitors - this is how confidence is formed. After all, a person is ready to part with his money only when he believes that he will not be deceived.

Do not rely only on the resources of the crowdfunding platform, run an advertising campaign on your website and in social networks.Try to reach your target audience: the more contacts you have, the higher the probability of success.

Reasons for the failures

Due to the lack of any significant experience in working with crowdfunding among domestic entrepreneurs, we will try to systematize the mistakes made by foreign users who tried to organize a collective fundraising for their business projects via the Internet.

Distressed man

We hope this information will help our compatriots to avoid blunders and get the expected effect.

Bad choice rewards

Even sending a CD can be expensive, if you do not take into account all the nuances.

The creator of one of the computer games, Ed Carter, planned to raise $ 21,000 for its development, promising investors to send a disc with his creation as a reward. But the entrepreneur did not take into account the geography of their investors, which covered almost the whole world. As a result, he had to spend on mailing $ 100 thousand.

Failed phrases

Practice shows: announcements in which the words “we guarantee you” are present, “in addition, you will receive”, “mention you” and “we can afford”, were more likely to succeed than projects, in the description of which there were combinations of words: “although would be a dollar "," empty "," if you believe "," not having the opportunity. "

Man balancing on rope

You have to create the impression of being confident in the success of a merchant, then others will believe in it.

Weak PR

We have already written earlier: to tie your hopes exclusively to the crowdfunding platform means to condemn yourself to failure. Try to get your potential investors on it, then the result will not take long.

Crowd Funding Comparison

And now about where to organize a collective fundraising for your project. Crowd funding sites of the Russian-language Internet:

Playground Fundraising method Site Commission The presence of a section of business projects The presence of sections of creative projects
Planet Vin, OV Before 18% + +
Bloomstarter Vin 23% - +
Circles SC 15% - +
ThankYou SC 15% - +
Rusini Vin 0 + +
From the world by thread Vin 23% - +

Abbreviations:

  • Vin is all or nothing: you receive money only if you collect the full amount. Otherwise, the funds are returned to the Beckers.
  • OB - it is allowed to receive a part of the collected funds if it was not possible to accumulate the entire required amount.
  • SC - free price: investors themselves determine their reward. Used exclusively for creative projects.

If you still fail to raise the necessary funds,do not despair: there are 1000 and 1 ways to earn a million without investment!

Russian crowdfunding. How to quickly raise money for a project:


Take it to yourself, tell your friends!
Read also on our website:
How to choose a platform for online trading
How can an entrepreneur choose an online platform that will provide high sales and good profits? On which message board for a private person is it better to place an offer to sell? Look for answers in our article.
Profitable business for a small town
There is an opinion that it is not profitable to open a business in small towns. So usually say entrepreneurs-amateurs. Ensure the opposite by reading our recommendations. Such locations are ideal for starting a business.
Open a point of sale in the market without risks
Trading on the market, according to many, remains the easiest and most affordable way to make money for start-up entrepreneurs. What documents are required for the outlet to open? Are there any nuances you should know in order to achieve profitability? Let's figure it out together.
Test tube millionaires: the experience of rapid enrichment
If you doubt that you can get rich in one day, this article is for you. It reveals the secrets of success of those who became a millionaire in one day. Ways of quick money and ideas for the business "in a million" - all this is only on our website.
show more
How to make a business out of an idea
A person supplying his ideas with donor mechanisms is called an entrepreneur. How to start a business machine and not become bankrupt, or start a business without initial capital - read this article.
7 secrets of successful sales
Increase sales - the goal of each seller. What is hindering this, what upsell, crosssell and downsell are, what the client wants, whether advertising works when promoting goods, the secrets of successful sales - read in our material.
How to choose the right office space
Have you decided to start your own business? Does your company plan to move? In this case, you face the question: how to choose a room for a new office? Let's see what you need to know to make the most correct choice.
Ready-made companies - a convenient solution to fast contracts.
This article is for those who do not want to spend their time and energy to start their own business. The ideal option in this case is the purchase of a ready-made company.
Business sites: only quality resources
It is business sites that often help directors of large holdings, bankers, oil tycoons, and entrepreneurs learn the quotes for currencies, gold, and oil, as well as find new partners and investors. So where do you find these sites? And how to spend the minimum amount of time?
Where to invest money in 2016? TOP 5 best investments
Where to invest money to make them work and bring a stable income? How much to start with? Where you should not invest in order not to lose them? 5 reliable ways to invest - in our article.

Related news

  • How dangerous is the crunch in the joints
  • City portals and official sites of the city of Krivoy Rog: a selection of sites
  • Work and employment
  • Photowalk around Grozny
  • Driving schools of Vinnitsa: phone numbers, addresses
  • Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup

    Crowdfunding: raising money for a startup