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How Does Crowd funding Service Work for Your Business?

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While crowd funding service is now an interesting option for your business idea, here is how it actually works to collect funds from people.

Start With An Idea

You should start by developing a business idea in a business proposal. Explain comprehensively how your business will work, how it will return profits, and how it is different and unique from other businesses. A unique, brilliant, and innovative idea is the one that people would love, so you have to elaborate this idea with your team.

Pick and Register to A Crowd funding Service

There are so many kinds of crowd funding service. They all have different criteria and eligibilities. Pick one that suits you well. The more popular the service is, the easier for your business to be taken seriously and responsibly. After choosing, register your business proposal and wait until it finishes reviewing your business idea.

Start Campaigning

Once your proposal approved, you can start campaigning your business idea. Create an interesting campaign for your business. Sell it to as many people as you can. Share your campaign to social media. As people start to pay some of their money for your business campaign, you will start counting to fulfill your crowd funding goal.

Achieve Crowd funding Goals

Weeks after weeks passed and finally, your crowd funding goals are achieved. Congratulations, now you can start your business. You get a list of funders (or also called backers) for your business and the crowd funding service will subtract a small percentage of your funds as the fee. Now you can receive your fund and turn your business idea into an action.

Rewards Your Funders

Don’t forget, you still owe a responsibility to your funders. You either give away some of your business products to them (like in a reward-based crowd funding) or give them other kinds of rewards, depending on the type of crowd funding service you chose earlier.

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Business-Two Types of Crowd funding Services

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Crowd funding has been widely known as an alternative way to fund your business. Crowd funding works both for starting a brand new business and expanding an established business. With the advancement of internet and social media, crowd funding starts to grow even bigger nowadays. In 2015, for example, crowd funding has been used to raise a total US$34 billion for all businesses in the entire world

Most crowd funding platforms are now available online, with almost 4,000 websites now open crowd funding service to everybody with a smart and brilliant business idea. Regarding the way these crowd funding platforms pay returns to their funders, this big amount of websites can be categorized into two big categories.

Reward-Based Crowd funding

Reward-Based Crowd funding is one type of crowd funding service that asks you to give your funders some sort of “rewards”, mostly based on the result of your business. For example, if you start a T-shirt company, once you get your crowd funding project fulfilled, you owed your funders (or also called “backers”) a T-shirt, a toolbag, or even a specially designed T-shirt from your company. These rewards are varied, based on the amount of fund your backers pay for you. Usually, backers with the most fund will get the most valuable reward and vice versa.

You can find this kind of crowd funding at Kick starter, Indiegogo, or Rocket Hub.

Equity Crowd funding

Different from Reward-Based Crowd funding, Equity Crowd funding makes you owed your backers a share of your company. So it is like your backers are now part of your company because they invest their money in your business. Of course, no certain rewards are given, but you still have to disclose some eligibility and responsibility to your backers. You may invite them to participate in your business meeting or you can pay them some dividends or annual bonuses.

Equity Crowd funding can be found at Seed Invest or Angel List.