How to finance your business with crowdfunding campaigns

They say that one grain does not make a granary, but it helps the other and more and more businesses or projects are based on this principle to take their first steps. Crowdfunding is a relatively new form of financing that is based on small but numerous contributions. In this article, we will tell you more details to take advantage of its full potential.

What is crowdfunding and how does it work?

Crowdfunding is a form of collective financing of projects that involves resorting to small contributions from a large number of contributors or patrons.

It is an alternative to bank loans for starting a business and/or social activity, which is why it is especially interesting for small businesses or projects with limited or no possibilities of getting into debt.

Currently, this type of financing is welcome to photo retouch editior website more established in the social sectors (NGOs, health, education…), cultural sectors (literature, art, cinema…) and content dissemination ( youtubers , blogs, digital press…). It is also gaining popularity among startups , such as the game Exploding Kittens , and companies linked to the development of rural areas and ecology, such as Madrid Km Región and Apadrina un olivo, which are some examples of crowdfunding.

As we will see below, crowdfunding has various formulas, but it is always based on the trust of investors . The main reason for patrons to contribute to the project is its social utility and positive impact, with which they feel personally identified.

Communication is therefore a basic pillar being first isn’t everything, but it’s a great advantage! in all crowdfunding campaigns. It is essential to make clear at all times how much money you need, what you are going to achieve with it and the progress you are making towards achieving it.

Types of crowdfunding

Crowdfunding initiatives can be grouped into four types, depending on the returns achieved by investors:

Donation Crowdfunding
As the name suggests, donation is solidarity crowdfunding where investors do not expect anything in return for their contributions. They donate their money or resources only because they identify with the project and want it to succeed.

Donations are the type of crowdfunding quick signs that requires the most trust from contributors. They can work when the project has an easily identifiable social or charitable purpose. This includes non-profit organisations, but can also be viable for companies with a social initiative or strongly involved in the local development of an area.

In any case, if you have a business project that aims to generate profits in the medium term, it is best to offer some kind of reward to your investors to increase their involvement. As we will see below, the possibilities for offering returns are very varied and not just monetary.