How to get money for your business using crowdfunding
His Work Educational Program / / January 05, 2021
What is crowdfunding
Literally translated from English, this is "crowd funding": crowd - crowd, funding - funding. In fact, it is so. Crowdfunding is a way to raise money by engaging a potential audience. People are literally dumped by the whole world to implement your project.
Thanks to this financial support, the Exploding Kittens and Dark Souls board games, the 3Doodler 3D pen, the GeoOrbital electric bicycle wheel and many other ideas took off.
How crowdfunding works
Let's say you have business idea - to make a lightsaber like a weapon from "Star Wars". To start its production, you can go the traditional way: use your own funds, take a bank loan, find an investor. And also - publicly talk about your project and ask people who like it to finance it.
This is usually done through an intermediary - a crowdfunding platform. Such sites are specially created to raise funds for the implementation of ideas. It is convenient to use them both for recipients who raise money for the project and for donors who give it.
Crowdfunding platforms, as a rule, check the documents of the authors of the proposals and set the conditions under which the money will be returned to those who transferred it. Donors receive at least minimal guarantees that they are not dealing with a fraudster. Recipients - access to a wider audience and promote their idea.
By funding a project, sponsors do not just support it, they receive something in return. In the overwhelming majority of cases, this is actually a product that is being developed with sponsorship money. Often there are several lots, and their content depends on the amount donated. In fact, this is a kind of pre-order, but with additional risks, since the idea is not always transformed into a real product. That is why crowdfunding for a donor is, first of all, support of an idea, and secondly, a purchase.
Sometimes the reward can be symbolic and is estimated at much less than the contribution. This most often happens when it comes to socially useful or creative projects, and not about business.
How to present your project on a crowdfunding platform
Come up with an idea
Crowdfunding is not suitable for every project. For example, you decide to open a supermarket. If you come to investors with a business plan and demonstrate that your store will be profitable, they are likely to invest in it. That won't work with crowdfunding. Potential donors are unlikely to be fired up by a project whose purpose is to make you richer. The idea should be innovative, delight or problem-solving, "relieve pain" of people. All in all, you need something really cool.
Ekaterina Grigorieva
Project manager “Volga-River - Stylish Souvenirs about the Volga”.
Our project was born out of a problem. IN Saratov friends came from another country. We tried to find interesting souvenirs, but we couldn't. Everything was dated and made in China. In other cities, we saw interesting, trendy souvenirs, and we had an idea to make our own Saratov ones.
Among the sights of Saratov, the main one that resonates in the heart is the Volga. This is how our Volga-River project came about. We wanted to make not trinkets, but useful things for everyday use: thermo mugs, hoodies, suitcase covers. We have several concepts: "Volga is my sea", "I am from Volga", From Volga With Love.
Work on the project
If you go to a crowdfunding platform with an unformed idea, you can hardly get a wide audience to believe in the project. Let's say it's not enough to write, "I want to make a lightsaber." You must work out the technical side, calculate how much the production will cost, take into account all the little things. In general, the project should be packaged with the same care as if you were offering it investors. Just focus not on profit, but on the coolness of the idea.
Choose a crowdfunding platform
There are many such sites. When choosing, pay attention to the following criteria:
- Specialization. See what projects are already presented on the platform, read about it. If you have a technological development, and the site mainly hosts music and film projects, it is likely that you will face failure. It's just that the audience will not be yours.
- Audience size. The more visits the site has, the more potential donors you have.
- Collection threshold. The author of the idea indicates how much he wants to receive. It happens that donors send less. In such a case, the platforms set a minimum collection threshold as a percentage of the final amount. If it fails to pass, the money is sent back to the donors, and the recipient receives nothing.
- Site commission. The platform will take part of the collected money for itself. Which is logical, since its work requires money. The size of the commission may vary.
Here are four of the most popular and versatile example platforms: two foreign and two Russian ones.
1. Kickstarter
Perhaps the most popular crowdfunding site in the world with no specialization. Here they collect money for the production of gadgets, games, films, clothes - whatever. The collection threshold is the highest - 100%. Commission - 5% and at least 3% for processing payments.
Run project on Kickstarter can residents of only 23 countries, among which there is noWho can use Kickstarter? Russia. So you will need your person abroad.
2. Indiegogo
Another popular site that collects money for literally anything, including for goals far from business like weddings. Although the platform itself positions itself as a platform for technological products and art projects.
Here you can choose the collection threshold: "All or nothing" or flexible funding. In the first case, donors will be sure that they will return their money if you do not achieve your goal. In the second, you will be given any amount collected. But such a choice can temper donor enthusiasm, because donors receive no guarantees and are simply risking money.
Commission Indiegogo equal to 5% if you immediately started collecting on this site, and 8% - if you went from another site where you had previously launched a similar campaign. The payment processing fee will be at least 2.9%. Projects are allowed to be created by residents of 22 countries, among which there is again noWhat is My Country of Legal Residence and Bank Account Location? Russia.
3. Boomstarter
it Russian counterpart Kickstarter, where only Russian citizens can launch projects. Commission service is 3.5%, the same amount will be taken by the payment system, but only if the funds are collected. You can also choose the collection threshold: "All or nothing" or "To the goal".
4. Planeta.ru
This Russian platform more focused on supporting creative people, because the final products here are films and clips. But there are also sections for raising funds for projects in the field of business, technology and innovation, for example, for the schemeRussian science against COVID-19 treatment COVID-19.
The commission is 10% of the amount if it is received in full, 15% - if it is collected from 50 to 99.9%. If less than half is collected, the funds are returned to donors.
Ekaterina GrigorievaWe focused on the Russian market, so we chose Boomstarter. Plus, it's more business-oriented than Planeta.ru.
Calculate the required amount
It would be logical to assume that you should ask for as much as you need to implement the idea. But it's not that simple. First, you need to make a sensible estimate of how much you can collect. Remember the collection threshold - sometimes, by raising expectations, you can stay no money at all. Secondly, put the platform commission in the amount, otherwise, after all the deductions, the funds may not be enough.
Ekaterina GrigorievaSometimes there is a reason to lower expectations a little. For example, Boomstarter starts promoting you if you reach a certain percentage of the collection. We first set a goal of 350 thousand. But then they reduced it to 200 thousand. Thanks to this, we received promotion from the site, already when we collected 100 thousand. As a result, we managed to get the target amount.
Keep in mind: crowdfunding does not mean that you can start collecting without a ruble in your pocket. You still need start-up capital to prepare a project for presentation and its subsequent promotion. But more on that later.
Prepare materials for the design of the project page
Each site has its own rules, but in general, you will need to describe your idea in detail: what you came up with, what problem you want to solve, why it will work. It is better to prefer graphs, tables and other visual materials to ornate wording about anything.
Naturally, there is a fear that someone with a budget may use your best practices. But this is the risk of crowdfunding: they will not want to invest in secrets covered with darkness.
Shoot a video message, take a photo, prepare renderings. At the same time, try to do project, as they say, with a human face. Passionate enthusiasts are more sacrificed than soulless corporations.
Determine the reward
Usually these are several lots of different values, which are sent to sponsors depending on the amount of their contributions. If you are raising money to produce something, the easiest thing is for you. You can reward with your product. In the case of lightsabers, such as lots:
- 100 dollars - lightsaber;
- $ 180 - two lightsabers;
- $ 300 - lightsaber and lifetime right to replace the old model with a new one at no additional cost.
If your product cannot be touched, you have to fantasize. For example, if you are raising money for a video, donors can be invited to the set or mentioned in the credits.
Typically platforms require the reward to be unique and not available elsewhere. So thank donors with key chains AliExpress will not work.
Plan your marketing campaign
It is better to start promoting the project in advance, before the fundraising starts. Then you can receive money from the first day. But even after its presentation, it is unlikely that everything will work by itself. Therefore, you need to carefully consider your work with the audience.
Much depends on the market you enter. There are many regular users on foreign platforms who scour the sites in search of interesting projects. In Russia, with a high degree of probability, you will have to talk about your idea on the side and from there bring the audience to the crowdfunding platform.
In any case, use all available connections. It's a good idea to create project pages in all social networks. Only they should not be "dead", so you will need to constantly update them, stir up interest in the project, and maintain close contact with subscribers.
Ekaterina GrigorievaWe used every opportunity, for example, we went and asked local TV channels to make a story about us. And they talked not only about the project. We shared information about tourism, souvenirs, crowdfunding - and all this eventually worked for the project.
So that the promotion is not chaotic, it is useful to develop a media plan in advance. Include in it the possible reasons and dates for the publication of news, determine influencers and the media you can turn to. Be prepared for the fact that promotion is a full-fledged job that takes time.
Check out the crowdfunding platform's policy and find out how it promotes projects. Site specialists can, for example, create different ratings. Think about how to get there.
Submit your project to a crowdfunding platform
To get started, study the FAQ section on the site. Often it contains comprehensive instructions on how to draw up a project, as well as other working advice. The site is interested in that you overcome the collection threshold, because then it will receive a commission.
What to do after launching a project on a crowdfunding platform
Follow the collection
The crowdfunding process is unpredictable, so it is important to keep your finger on the pulse and adjust the campaign in time. If something goes wrong, find out the reasons: communicate with donors, consult with the curator of the crowdfunding platform.
Implement the project
When the collection is over and the money is credited to your account, the most difficult thing remains - to translate your idea into reality. And only you know how to do it. Most importantly, when you're done, don't forget to thank the donors and send them the rewards.
Pay your taxes
Donations are exempt from taxes, but only those made for generally useful purposes. Therefore, they may not be paid by non-profit organizations.
Funds for profit-making projects are differentLetter dated November 25, 2016 N СД-4-3 / 22415 @ a business. If the recipient acts as an individual, then he pays 13% of the tax, if as a legal entity - at the rate within the framework of his tax regime.
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