By Evan Vitale
You’ve probably heard the term “crowdfunding” many times, but now you’re thinking it might be a way for you to raise money for your business, startup idea, non-profit, special project, etc.
In a nutshell, crowdfunding is exactly what its name implies: the ability to raise money and finance a project by pooling together donations from many individuals.
Here’s how it works:
You create a free account on a crowdfunding website (Kickstarter for example) and post a video in which you explain your project, business, invention, idea, etc. It’s a pitch. You need to be interesting and your idea needs to capture as many pairs of eyeballs as possible.
Based on the amount of the donation, you are willing to give them something. It can be a gift, a product you’re creating or even a part of the business. Some music artists, for example, give a copy of their latest CD for a small donation or a t-shirt for a little bit larger donation. What are you willing to give as a gift for someone’s donation?
As your crowdfunding project starts, donors can see your profile, pitch, etc., as well as how close you are to your overall financial goal.
If you reach your donation goal, the crowdfunding website earns a royalty fee (usually around 5% or so) plus credit card processing fees. However, if you don’t reach your financial goal, no money is collected and the project ends. Be aware that some crowdfunding websites collect a small fee for failed projects as well.
If you’re considering a crowdfunding project, a good place to start is by visiting several crowdfunding websites, reading many project profiles and collect ideas. Make sure you’re aware of the site’s fees and how the website is structured before you submit your crowdfunding project.
I’ll have more crowdfunding ideas in the second part of this blog series.