Crowdfunding Investments: How They Work and How to Get Involved
Every business requires some financial resources, especially at the beginning, when it isn't earning enough money to meet the necessary expenses. Most business owners turn to banks, financial institutions, and even private investors to get the money they need to start a venture.
Unfortunately, many entrepreneurs fail to find the required funding, even if they have worthwhile ideas. That is especially common among black entrepreneurs as more traditional financial institutions are biased against specific communities. Crowdsourcing is a great alternative and has provided thousands of business owners the resources needed to start their venture.
What is Crowdfunding?
Crowdfunding is the strategy of gaining financial assistance from a large group of people. Instead of relying on a bank or organization to provide a big loan, you can ask a community of supportive people to make small contributions to meet a large goal. For example, business owners can set a goal target or $100,000, promote their campaign on different social media platforms, and request contributions. Some people will invest $100 or $500, while others may invest $20,000.
Instead of relying on a small group of venture capitalists or relatives, you reach out to thousands of investors ready to support a great idea. If you have a good crowdfunding marketing strategy, you can reach the financial target in weeks or months.
Step-by-Step Instructions on How to Crowdfund a Business
Crowdfunding isn’t as easy as it used to be. There are thousands of worthwhile ideas on popular crowdfunding platforms, so you need to find a way to make yours stand out to run a successful campaign. Laying the right foundation and implementing a good strategy can help business owners reach their target goals quickly. Here are step-by-step instructions on how to create a promising campaign:
1. Research the Crowdfunding Meaning
The first step is to understand what crowdfunding is and how it works. Take time to read all the terms and conditions of different platforms, regulations governing this kind of funding, challenges, and research on how to get crowdfunding donations. If you don't understand the system, it won't be easy to use it effectively.
2. Choose the Right Platform
Choose a platform that can handle your business parameters and attract the right audience. Consider which platform is best suited for what you offer and can help your campaign stand out. Some notable crowdfunding websites include:
- StartEngine – This platform has over 250,000 registered investors, has generated over $150 million in investment funding, and helped over 350 companies find their resources.
- MicroVentures – MicroVentures has over 110,000 investors, over 400 investment opportunities, and has generated more than $220 million in investment funding.
Other options include Kickstarter, GoFundMe, Indiegogo, Publishizer, and Patreon. These options have their pros and cons, so it is a good idea to explore them carefully before making a decision.
3. Understand Your Target Audience
What kind of investors do you want to attract? Who will be interested in your project? Take time to research and understand your target audience to help you design a campaign that works. Visit social media platforms, interact with people interested in your idea, and look at websites like Reddit and Quora to understand their concerns.
4. Create Impressive Marketing Materials
A campaign is only successful if you promote it properly. All entrepreneurs must create impressive promotional materials like well-written campaign pages, white-papers, social media posts, videos explaining the idea, and how it will benefit investors. Make sure your campaign materials are informative and straightforward. People should be able to understand your concept, its purpose, its impact, goals, and other related factors. Create an optimized crowdfunding campaign template based on solid research.
5. Set a Reasonable Goal
Always set a reasonable target for your campaign. If you set the target too low and reach it quickly, you may miss out on interested investors because they won’t contribute if you’ve reached the goal. If the target is set too high, you won't reach it quickly enough, and prospective investors will assume the campaign isn't popular.
6. Promote Your Campaign
Promote your campaign on social media and through personal connections. Tap into your network, create email lists, and network with industry decision-makers to attract your campaign's attention. All crowdfunding strategies require constant promotion to succeed.
7. Build Trust Through Communication and Feedback
Build trust with investors through regular communication. Ensure you keep them up-to-date on what's going on behind the scenes and how the project is progressing. Don't make any promises you can't fulfill because that will only place your reputation in jeopardy. Accept feedback from investors and implement changes accordingly. This feedback can help you refine your products or services, making them better suited for the market. Always deliver on your promises because that will improve investor confidence.
Examples of Black Crowdfunding Campaigns
Many black entrepreneurs have benefited from crowdfunding websites and well-planned campaigns. Here’s a look at some of the more notable campaigns to consider:
- Kiddie Kredit – Kiddie Kredit was established in 2018 to instill financial literacy in children. Kids can learn how to manage money, save, and understand credit through interesting games. The campaign is on MicroVentures and has raised $33,620 from around 111 investors.
- PopCom – PopCom is a self-service automation system designed for vending machines and kiosks. The system helps businesses understand their customers, improve user experience, and utilize big data. The campaign is on StartEngine and has raised over a million dollars from 2,672 investors.
- Streamlytics – Streamlytics helps users monetize their most important digital asset, their data. The platform gives users ownership of their streaming data on platforms like Spotify, Hulu, Netflix, etc. The campaign is on StartEngine and has raised over a million dollars from 2,450 investors.
Research how to succeed at crowdfunding before starting a campaign to find more tips and tricks. A well-planned campaign is the best way to get the funding you need. It is also a good idea to consult with black entrepreneurs who have completed a campaign.