Crowdfunding Explained

Every great idea started somewhere – be it in the shower, a discussion with a friend, or just a random thought you scribbled on a piece of paper.

The great entrepreneurs take that idea and run with it (provided you’ve hit the innovation jackpot), while others fail to take action quick enough (and watch as their “great idea” materializes under another brand, company or entrepreneur.

So, what’s the difference between successful entrepreneurs and the ones that don’t make it? If you’re like so many people, the first thought that may have sprung in your mind goes something like the this:

“I would have used that great idea if only I had the funding for it.”

If the answer is “yes,” you’re not the first one.

And to be fair, it is not an easy task to do – make something from nothing. 

But in reality, gone are the days when bright-eyed entrepreneurs had to sacrifice their dreams because of a lack of funds. Nowadays, crowdfunding platforms have opened the doors for new possibilities, enabling entrepreneurs to raise the funds they need by using these crowdfunding platforms to mobilize and inspire large crowds of like-minded people who are ready to invest in your next big idea, provided you have a good one.

So ‘’what is crowdfunding?’’,  You ask.
In the following lines, we’re going to take you through what crowdfunding marketing is and how it has helped transform the lives of countless entrepreneurs who were in search of seed money for their start-up or product.

Crowdfunding Explained

In a nutshell, crowdfunding is an efficient way in which people can raise capital for their business by asking a large number of people for a small amount of money. In this way, crowdfunding works the opposite of traditional means of funding a business, which involved asking a small number of people for large sums of money. Thanks to the internet, crowdfunding platforms have been responsible for funding thousands of campaigns and generating millions in funds for all types of projects spread across multiple industries and niches.

How Does Crowdfunding Work?

Typically, a crowdfunding campaign starts when a person sets up their profile on one of the many crowdfunding platforms such as Indiegogo or Kickstarter. Once they have created a profile they use the crowdfunding platform to introduce their product to the masses. The platform is used to attract, motivate, entice and inspire potential funders to contribute to the cause by donating some money to the project. But, that doesn’t mean that the people who fund a crowdfunding campaign go home empty-handed once the product hits the shelves.

There are multiple types of crowdfunding campaigns with each of them offering something to the contributors. The following are some of the types of crowdfunding campaigns that you can start today to get initial investment for your innovative idea:

Reward-Based Crowdfunding

The truth is that people aren’t prone to investing in you just because they believe in you and your cause. A reward crowdfunding campaign acknowledges that by making sure that those who make contributions to your crowdfunding campaign get something in return for their generosity. Before you roll your eyes and skip to the next option, here’s something that you need to know about reward crowdfunding.

Contrary to popular belief, the rewards do not have to be a new car or a new phone. The rewards that you offer those who make contributions to your crowdfunding campaign can be in the form of a gift (which does not have to be expensive).

More often than not, those who run crowdfunding campaigns for products give those who have contributed to the campaign the product to show their appreciation, that is, if the product, gadget or gizmo does not cost a lot of money, or else that wouldn’t be a sound business strategy, even if it is a nice gesture.

Donors who will contribute to your campaign will be more than happy to get regular updates about your product or a mention on an album cover, or discounts on their purchases. Reward crowdfunding is a great idea for motivating others to join in on the cause, but more importantly, it enables you to attract those donors who will gladly give you their money if they expected something in return.

Besides, how many people invest their hard-earned money in something without expecting nothing back? Exactly. This is why a reward-based crowdfunding program is a great idea for many entrepreneurs and small business owners.

Equity Crowdfunding

Investors who make contributions to an equity crowdfunding campaign expect to be investing in an opportunity to exchange for equity. In other words, money is given in exchange for shares to a company or even for a small stake in a startup business. Equity crowdfunding campaigns are attractive avenues for those investors who bank on the share prices going up if your product is a success. But, it is a gamble, since the share price can take a dive and the lenders can end up losing money if your product turns out to be a dud.

Why Use Crowdfunding?

Crowdfunding has proven to be the proverbial silver bullet that entrepreneurs have always looked for to keep their innovative ideas from biting the dust. The following are some of the main benefits of using crowdfunding platforms as the launching pad for your next big idea.

Expand Your Reach – One of the main reasons why entrepreneurs reach out to crowdfunding platforms such as Kickstarter, Indiegogo and so on is because it gives you access to thousands of potential investors who may be ready to join your cause.

Customer Experience – Creating a crowdfunding campaign profile is a great way to get a conversation going about your big idea. You can also promote your campaign using social media and email marketing to pique the interest of potential investors who may have been hesitant towards contributing to your campaign at first. As you continue to communicate with your audience, it will give them a better idea of your business philosophy and what your brand is all about. This will further ignite their interest in your campaign.

Efficiency – A crowdfunding campaign is by far one of the most efficient ways to grow funds for your big idea. Furthermore, it allows entrepreneurs and startup owners to have complete control over their fundraising efforts. Additionally, by getting access to such a large pool of investors under a single platform, it does away with the need for entrepreneurs to pursue investors individually, which is ineffective and time-consuming.

Crowdfunding Best Practices


Now that you’ve come to know of the reasons why every entrepreneur should try out crowdfunding, here’s how you can get started. Like all other marketing efforts, you will need to come up with a strategy that has to be well thought of and it should answer all of your challenges for the crowdfunding campaign. Keeping that in mind, the following are tried and true factors to keep in mind when coming up with a crowdfunding strategy.

The first crowdfunding campaign took place way back in 1997 when the American rock band Marillion needed funds to go on tour. Considering that this was after the release of their seventh studio album, which still didn’t result in generating any moolah, their loyal fans took to the internet, which was in its infancy at the time and managed to generate up to $60,000 in funds for Marillion to tour the United States. Not bad for a first attempt.

Now, imagine how much potential there is out there for crowdfunding campaigns today considering the enormity of the internet in the world we live in now. With that in mind, let’s take a look at some of the tried and tested strategies used in crowdfunding campaigns.

Know Your Audience and Be Clear

This is a no-brainer, but before you start any crowdfunding campaign, you will have to identify your audience. This is going to be the target demographic that’s most likely to respond to your efforts. Also, since there are several crowdfunding platforms out there, you will need to identify the best option. In this case, it will be the platform that attracts the largest number of people from your target demographic. More importantly, you need to make it clear what you are offering in terms of your new, innovative idea, and what those who contribute can expect for their investment.

Preparing to Launch

It’s no surprise that the most successful crowdfunding campaigns that are planned out months in advance. This is to ensure that their marketing strategy has been properly tweaked and that there are proper mechanisms in place to deal with any kinks as they arise. There are a few other things that you need to keep in mind:

Make Yourself Heard

Tell potential supporters about your campaign ahead of time to get them interested. This can be in the form of a press release or frequent reminders via social media posts, blogs, and emails. If you have the budget for it, use Cost Per Click/Paid Ads. The idea is to let your audience marinate in the potential of your next innovative idea so that when the time comes, they will be ready to contribute to your cause.

Expand Your Network

The internet is brimming with would-be entrepreneurs all pitching their next idea, so what gives you the edge. The answer; networking. Similar to real life, you aren’t going to get far if you aren’t able to network and expand that network.

Whether it’s through social media posts or traditional emails, you need to ensure that your idea gets in front of the most eyeballs as possible if you want your crowdfunding campaign to succeed. Networking doesn’t have to be strictly online, visit your local grocery store or sports shop, fitness center or any place that has good foot traffic and then pitch your idea or just casually mention your upcoming crowdfunding campaign and how it’s going to be a game-changer.

D-Day

Come launch week, you need to send out the message so that the people you contacted before know that your crowdfunding campaign has finally launched because you know, people have the stuff to do and it can be really easy to simply forget. Rather than sitting around waiting to cut the cake and nobody shows up, you need to make the most noise on your launch day. Post the launch on all social media platforms (Facebook, Instagram, etc.,), your website, landing pages, guest posts, forums, and even send out emails (MailChimp, Autopilot HQ, etc.) to awaken your fans from slumber.

The Follow-up

Even if you started strong and hit the ground running, you will need to maintain the pace throughout the entire lifecycle of your crowdfunding campaign. Keep sending out reminders to nudge your target audience in the right direction. Use urgency as a tool to get people to take action “NOW” rather than later.

Even if you’ve reached the end of your crowdfunding campaign, that’s no excuse to hang your hat and call it a day. Use the principles of “FOMO” (Fear of Missing Out) to drive in that last burst of traffic, because even that last-minute effort can end up making all the difference in your crowdfunding campaign. Create campaign-specific crowdfunding pages and unique hashtags to help spread the word. You can gauge the fruits of your labor by using analytics tools that are provided for different social media platforms.

Ending Note


The success or failure of a crowdfunding campaign isn’t solely determined by having a “great idea,” it is equally important to make sure your crowdfunding campaign has been well thought of and well-executed. The reason for this is because countless people felt they had a great idea, but their idea didn’t see the light of day, simply because they did not put in the leg work while crafting their crowdfunding campaign. Keeping that in mind, the aforementioned tips should help you get your next crowdfunding campaign off to a good start.