Crowdfunding 101 - Part 2: Decide

Welcome to the second part in our series Crowdfunding 101.  Join us for the next 4 weeks to learn more about how to build and run a successful crowdfunding campaign.  We have all the best hints tips and tricks to help you make your great idea a reality

This is part 2 of 8.  Come back every Wednesday and Friday for more tips

Decide Between Rewards, Donations and Equity

There are four basic types of crowdfunding projects:

Rewards:

• in return for an investment in your company or idea, investors will receive some form of cool reward (e.g. a free sample, discount card, name on a product) 

Donations:

• if you are registered charity you can ask the crowd for a no-strings attached donations to support a good cause

Equity:

• in return for an investment in your company, investors will receive equity shares that will given an ownership interest in the company and the opportunity to share in the profits if it becomes successful

Debt:

• instead of making an investment in exchange for shares, investors loan you money and are re-paid on an agreed upon schedule (CrowdBnk does not currently offer debt crowdfunding)

To determine which model is best suited to your needs, have a think about where your company is in its lifecycle.  If you have a raw idea and are looking for funding to develop it further (e.g. by building a prototype) then a rewards project may be the most suitable approach.  If, on the other hand, you have already proved your concept and have serious growth prospects, then it is likely you will be looking for a greater investment amount to fund the expansion and an equity project may better reward your investors.   At the end of the day, like most crowdfunding decisions, what works for one entrepreneur might not meet the needs of another, so you should consider what type of project you are most comfortable with and balance that against with an assessment the likelihood of a successful fundraise.  If you need help deciding, we’re more than happy to provide you with our opinion of what best suits your project.

See you Friday for the next installment:  How to incentivise your supporters - Develop Your Concise Business Plan

Part 1 | Part 2 | Part 3 | Part 4 | Part 5 | Part 6 | Part 7 | Part 8

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