Crowdfunding in 2022 Explained

The Spark of a New Investment 

Every great idea started somewhere. 

Sources can range from in-shower epiphanies to discussions with friends. Yes, even napkin scribbles count. 

Great entrepreneurs take that spark and run with it. Provided that you’ve hit the innovation jackpot. Unfortunately, others fail to take action quickly enough. The latter 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 a segment of people, it could go like this:

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

There are countless entrepreneurs or would-be entrepreneurs who don’t pursue when it comes to money, investments, startup funding, finances, or initial capital.

But, the truth of the matter is, these are just the excuses – most people lack the drive or passion that fuels their thirst for success, be it in starting their own business or taking their “great idea” from that napkin to the drawing board.

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. This has enabled entrepreneurs to raise essential funds by using crowdfunding platforms to mobilize and inspire large crowds of like-minded people. Lo and behold, there is an active community of people ready to invest in your next big idea. 

So what is crowdfunding you ask?

We’re going to take you through what crowdfunding marketing is. By the end, you’ll have an understanding of how it has transformed the lives of countless entrepreneurs who needed capital; with little of their own. 

Group Small to Create Big

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 the 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. They’ve additionally generated 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 those who make contributions to your crowdfunding campaign. In other words, rewards keep your pledges incentivized. If you aren’t prepared to offer discounts or free products at launch, be prepared for a low return on their investment; which ultimately, diminishes yours. 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 an inexpensive gift.

It’s the gesture that counts.

More often than not, crowdfund starters 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 exceed capital constraints. 

Donors who will contribute to your campaign will be more than happy to get regular updates about your product or discounts on their purchases. Heck, one no investment reward could even be in form of an album label mention. Reward crowdfunding is a great idea for motivating others to join in on the cause. More importantly, it enables you to attract those donors who want to see the fruits of their investments. 

Besides, how many people invest their hard-earned without expecting anything back? Odds are, they don’t. Reward-based crowdfunding programs are helpful mediums for entrepreneurs and small business owners alike. 

Peer-To-Peer Crowdfunding

As the name implies, with peer-to-peer crowdfunding, those who invest in your cause can expect to receive their hard-earned money back with interest. This type of crowdfunding campaign allows entrepreneurs to get the funds they are looking for by completely bypassing the traditional model of acquiring debt crowdfunding through banking. This has enabled campaign starters to bypass hefty bank processing charges.

Debt crowdfunding campaigns allow those who invest to enjoy bragging rights and the joy of achieving a return on their investment. 

Equity Crowdfunding

Investors who make contributions to an equity crowdfunding campaign expect equity as a return on investment. In other words, money is given in exchange for company shares or perhaps a small stake in a startup business. Equity crowdfunding campaigns are attractive avenues for those investors who bank on the share prices going up upon success. Alas, it does not eliminate a potential gamble. The share price can take a dive and the lenders can end up losing money if your product flops.

Why Use Crowdfunding?

Crowdfunding has proven to be the proverbial silver bullet that entrepreneurs have looked for to land a successful launch when dealing with low capital. The following are some of the main benefits of using crowdfunding platforms as an origin for your brand: 

Expand Your Reach – One of the main reasons why entrepreneurs reach out to crowdfunding platforms such as Kickstarter, Indiegogo, and others is because it gives you access to thousands of potential investors.  

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 the reasons why every entrepreneur should try out crowdfunding, here’s how to get started. Like all other marketing efforts, you will need to come up with a well-researched strategy. Make sure it answers all of your challenges for the crowdfunding campaign. 

The first crowdfunding campaign took place way back in 1997 when the American rock band Marillion needed funds to go on tour. This was after the release of their seventh studio album, which flopped. This caused a drop in band revenue. The original “crowd” funding campaign .heir 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. For starters, consider the enormity of the internet in the world we live in now. With that in mind, let’s take a look at the tried and tested strategies used in crowdfunding campaigns. 

Know Your Audience and Be Clear

This is a no-brainer: before you start any crowdfunding campaign you need to identify your audience. This is going to be the target demographic that’s most likely to respond to your efforts. 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. Then, disclose the return to your investors. 

Preparing to Launch

It’s no surprise that the most successful crowdfunding campaigns are planned out months in advance. This is to ensure that their marketing strategy has been properly tweaked. It’s best to have all the pre-launch kinks ironed out early on. 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. Try to send out 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. What gives you the edge? 

The answer is networking. Similar to real life, you won’t get far if you’re not ready to mingle with the resource that is the people in your circle. 

Whether it’s through social media posts or traditional emails, you should ensure that your idea is receiving exposure. Networking doesn’t have to be strictly online. A visit to your local grocery store, sports shop, or fitness center is a good pitching ground for your idea. It can start with a simple, casual conversation about your upcoming crowdfunding campaign. Show the public your pre-game day speech!

The Launch Day 

Come launch week, you need to send out a message that connects you to your investors. This message should go out sooner than later to avoid the mid-week disengagement from your audience. No one wants to throw a party without any RSVPs back. Post the launch on all social media platforms beforehand (Facebook, Pinterest, Instagram, etc.) on your website, landing pages, guest posts, and forums. You can even send out reminder emails to ensure your audience is notified. 

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. One way is to create campaign-specific crowdfunding pages and unique hashtags to help spread the word. Social media analytics tools offer insights into metrics needed to gauge your campaign’s performance. Last-minute efforts can make or break a plateau in the crowdfunding process.

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 strategized and executed in an efficient way. This lies in the fact that although most crowdfunding newbies have aspirations, their idea cannot come to fruition from opening up a campaign, alone.