A business concept – no matter how profitable – is useless if you do not have sufficient capital to turn it into reality. Ironically, most startups are not qualified for major loans and financing options. As such, startups look for other sources of funds to finance their business idea.
There are several ways a business can raise capital. Two major classifications are debt capital (bank loans, credit cards, personal loans, or bonds) or equity capital (selling shares of stocks). However, there are also other methods like angel investing, venture capital, business partnership, and grants. Ideally, companies should implement a mix of various capital-raising strategies to ensure cost-effectiveness.
For startups, one popular way to raise funds is through crowdfunding. In this capital-raising method, the company presents its project to a large number of potential investors and solicits funds from them. There are no rules as to how much an individual can give towards the project. In return, contributors are given a reward that is commensurate to the amount they’ve given.
With mainstream crowdfunding, people showcase their ideas on popular platforms like Kickstarter, Fundable, and Indiegogo. The community then contributes to the project, such as a few dollars to as much as thousands. In exchange for their financial support, they are entitled to pre-launch release, equity, or other rewards.
The rise of cryptocurrencies has opened up a new secure and transparent way for people to invest in blockchain-based startup ideas.
New crypto crowdfunding platforms allow developers, inventors, and startups to showcase their innovations. These developers then create and sell new digital currencies to the community –a process known as Initial Coin Offerings (ICOs). Transactions are recorded into the blockchain thereby making immutable records for these tokens. Unlike traditional crowdfunding where contributors get the company’s products and other rewards, contributors in crypto crowdfunding earn tokens which represent their share in the future profits. If the company does well, these coins increase in value over time and can be traded freely.
Blockchain offers a completely safe and transparent platform for capital-raising. This revolutionary crowdfunding platform can increase the success rate of a project.
Here are the six steps necessary to organize a successful crowdfunding campaign for your business idea.
Planning is vital in launching a crowdfunding campaign. You need to determine a specific niche that you will focus on. Know more about your target audience so that you can create a campaign that is relatable to them. The success of your capital raising efforts depends on how you reach out and convert your target market.
Consider the platform/s where you will launch your crowdfunding campaign. The choice of platform should depend on your target audience. There are several crowdfunding platforms available on the Internet. Choose a reliable platform with a sizable community of backers.
Decide on a date for the fundraising and create buzz around this date. Get the word out by implementing proactive marketing strategies in social media and other digital platforms. Release documents about the business idea and how it can solve your target market’s problem. Consider pre-launch ideas to get people hyped. The more people know about your solution, the higher the chance of getting backers. Take note that in some platforms, you should meet the funding threshold to be able to obtain the funds. This is why it is important to widen your reach.
Unlike ICOs where investors receive tokens, crowdfunding contributors get some reward. Determine rewards that will appeal to your target audience. Be creative with your perks to entice more contributors.
Keep your contributors updated about the progress of your project. This assures your initial investors, at the same time, encourage other potential investors to back your project. Your backers will appreciate it if they know where their contributions go. This also increases the reputation of your company.
6. Execute the campaign
Carry out your plan so that more people will know about your idea. Increase your visibility online through social media and email. Engage with your target community groups through the platform. Be ready to answer questions and inquiries from potential investors. At this stage, you need to prove to your contributors to the seriousness of your project. Always remember that the success of your campaign depends on how effective you communicate with people.
Follow these steps to organize your blockchain crowdfunding campaign and increase the chances of success. It is vital to have a well-planned launch to build your company’s reputation and gain acceptance from potential contributors.