Crowdfunding is where a number of people each invest, lend or contribute small amounts of money to your business or idea. This money is combined to help you reach your funding goal. Each individual that backs your idea will usually receive rewards or financial gain in return.
There are different crowdfunding options to choose from. Each type has different benefits for businesses and investors. You will need to consider which one is right for your business, project or venture:
- Reward crowdfunding - investors to contribute to your venture in return for non–financial benefits.
- Debt crowdfunding - investors fund your project in exchange for financial interest on their investment.
- Equity crowdfunding - people invest money in return for shares, or a small stake in your business, project or venture.
- Donation crowdfunding – designed for charities, this type of crowdfunding enables people to donate to a project.
Investors using crowdfunding will often look for:
- evidence of a tested idea that has the potential for future growth and development
- an idea belonging to a high growth sector (eg technology), or an industry that the funder has a personal interest in
- a niche idea that has an established audience in the marketplace
Crowdfunding usually takes place through a website. The platform will manage any online payments, and may often offer services such a video hosting, social networking, and enabling contact with contributors.
There are many crowdfunding platforms, each with different funding models and requirements. It’s important to research and choose one that’s best for your business, project or venture – see crowdfunding websites.
For more information see crowdfunding.
Watch this video tutorial which outlines the common sources of funding for businesses, including bank finance, equity finance and government grants.
Structure your business
Name your business
Register your business
Choose your premises