Crowdfunding for Startups

by Startacus Admin
It’s a simple idea - crowdfunding is a means of raising funds from your social networks. You post your business idea to a platform for a finite period to reach a set target and only pay commission if you are successful. In return donors receive non-monetary rewards (donations model), repayment with interest on the loan (debt model) or equity in the company (equity investment model).
Some juicy statistics on crowdfunding
Kickstarter (donations model) took over £2 million for UK projects in its' first month operating in the UK. Globally 80k projects have received funds totaling $429 million.
CrowdCube (equity model) 30 businesses have been funded to a total of £4.4 million. The Average investment was £2500, projects attracted an average of 60 investors for an average of 16% equity
Don’t forget social enterprises - 50 projects on Buzzbnk (donations and debt), the platform for the third sector, have raised over £450K. PeopleFund.It (donations), which merged with Crowdfunder
(donations) this month, raised over £40k for the Bicycle Academy in 6 days
Don't forget 50-60% of campaigns fail.
Why could crowdfunding be useful to you?
Raising finance
Crowdfunding is a tool for raising startup capital. Access to finance is difficult from banks; the business may be too small for venture capitalists or angels and you've probably exhausted your family's resources.
Testing the product
Crowdfunding is an effective method of validating your product and your strategy for bringing it to market. As your campaign progresses you can tweak the idea, the financials or the plan following real time suggestions or comments from potential investors.
Building a customer base
Your donors or investors have bought into your business and will be keen to see you success. You have a ready made customer base and evangelists.,
Which crowdfunding model - donations, debt or equity
See http://crowdfunduk.wordpress.com/quick-guide-to-key-crowdfunding-platforms/ for a regularly updated list of the UK platforms
Donations
If you have wide social networks who will not only donate (30-40% of your target)but spread the word and act as ambassadors for your campaign. The donations model works well if you have a tangible product, rather than a service, which can be given as a reward. Creative, digital and games are popular with donors.
Key sites are Buzzbnk https://www.buzzbnk.org , PeopleFund.It/Crowdfunder , http://www.peoplefund.it (UK), Kickstarter http://www.kickstarter.com and IndieGoGo http://www.indiegogo.com (US).
Debt
This will be expensive, even if less than a bank loan, without a track record as startups are a high risk. It may not be a good idea if you are pre-revenue rather than at the expansion stage. The key player is the Funding Circle https://www.fundingcircle.com where loans of a higher than average risk accrue 9%+ interest or Buzzbnk https://www.buzzbnk.org where loans for social enterprises accrue no or low interest.
Equity
A business can only post a request for equity investment with a platform that complies with Financial Services Authority regulations. This is a growing and complex field which is exciting and can give good returns for business and investor alike. This is a good model if you need to raise substantial amounts and have a team with a good track record. Key players are Bank to the Future www.banktothefuture.com/ (which offers donations and equity crowdfunding), CrowdCube http://www.crowdcube.com , SeedRS https://seedrs.com and CrowdMission http://crowdmission.com (for businesses with a social mission). Seminar on crowdfunding for business Manchester 22 January 2013 http:// crowdfundingequity.eventbrite.co.uk
Don't forget crowdfunding is a campaign over a finite time period. You must be proactive and spread the word.
This is a guest post by Anne Strachan from CrowdfundUK. CrowdfundUK runs workshops across the UK on how to run effective crowdfunding campaigns. In the spring she has dates in Bradford, Edinburgh, London, Manchester and Middlesbrough. CrowdfundUK@btinternet.com / CrowdfundUK.wordpress.com / @CrowdfundUK
Crowdfunding your project can help you raise the finance you need. Startacus is helping to make this happen right here. Read all about our own crowdfunding portal!
Join the Self Start society! If you like what you see here on Startacus and want to get involved yourself, why not become a member of our growing community by joining for free here!
Subscribe to our newsletter
If you would like to receive our startup themed newsletter, full of the latest startup opportunities, events, news, stories, tips and advice, then sign up here.
Tech Nation calls for tangible support to secure capital, talent, growth and exits needed to accelerate the growth of UK tech in decade ahead.

Glasgow-based This is Milk seeks investment for Neve Learning, its cloud-based Ed-Tech platform that has inclusivity and accessibility at its core.

With the UK facing a clear digital skills gap, Amy Caton, Digital Talent and Impact Senior Manager at BT Group shares some insights on what businesses should do to close that divide.

The lowdown on Berlin-based Beazy and its innovative solution that helps teams to plan, produce and deliver creative content and helps businesses to connect with talented content creators.

The lowdown on Fluffy, the app offering dog training, 24/7 vet messaging and insurance to give pet owners peace of mind and support them with their pet care responsibilities.

Huckletree's new Web3 HQ aims to put London’s West End at the forefront of Britain’s tech superpower ambitions.

Leading sports marketing platform, OpenSponsorship announces move into music sector, the first new vertical industry for the trans-Atlantic martech business.

Kingussie High School scoops first place for Junior and Senior categories at this year’s Growing Future Assets Competition.

The lowdown on Manchester-based Arctic Shores and its innovative recruitment solution to help candidate potential count as much as skills and experience.

With the demand for tattoo removal now greater than ever, specialist NAAMA Studios makes a bid for a further £11m in funding.
Published on: 11th December 2012
If you would like to enable commenting via your Startacus account, please enable Disqus functionality in your Account Settings.







- Tech Nation report reveals UK Tech could quadruple in value by 2032 with right conditions 23rd Mar 2023 Tech Nation calls for tangible support to secure capital, talent, growth and exits needed to accelerate the growth of UK tech in decade ahead.
- Neurodiverse learning and training platform Neve shares major six-figure investment opportunity 22nd Mar 2023 Glasgow-based This is Milk seeks investment for Neve Learning, its cloud-based Ed-Tech platform that has inclusivity and accessibility at its core.
- Huckletree opens new London hub for tech companies pioneering Web3 solutions 16th Mar 2023 Huckletree's new Web3 HQ aims to put London’s West End at the forefront of Britain’s tech superpower ambitions.
- OpenSponsorship making its move into the music sector 16th Mar 2023 Leading sports marketing platform, OpenSponsorship announces move into music sector, the first new vertical industry for the trans-Atlantic martech business.