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.
Take advantage of today’s digitised world! Here are 4 reasons digital marketing could work for you and your business.
Research shows that the majority of staff prefer benefits to high monetary compensation. Here are some ideas on how to increase talent retention...
Innovative project launched by UK Proptech startup to reduce workers' commuting and in turn help alleviate pollution and congestion
Startup funding is never easy, however here are a few of the options that can help you fund your startup without going broke in the process
The future and success of Britain’s high streets has been long debated. So, what are the tech trends that could help impact the Highstreet in 2020?
Innovative startups are currently being sought by BMW Group Financial Services UK which has just launched the third instalment of its Innovation Lab
Starting a business can be a lot of hard work, so here's a few ways to avoid burnout and find a healthy work life balance.
The child health app on a mission to become the first nationwide digital redbook, just got a step closer to making their mission a reality...
The Cambridge-based startup that has created an empowering tool to drive the next wave of biological innovation
The fintech startup that's making it a doddle for the self-employed, freelancers and contractors to organise their pensions
Published on: 11th December 2012
.png)
If you would like to enable commenting via your Startacus account, please enable Disqus functionality in your Account Settings.
- Ideation NI Thon at NI Science Festival sets out to solve global issues 17th Jan 2020 At one-day event Ideation NI Thon, students will get the chance to solve global and local sustainability, environmental, city and health problems.
- NI startup ESTHER takes flight to New York 16th Jan 2020 NI startup ESTHER, a peer-2-peer giving platform allowing charitable donors to give money directly to people living in poverty, head to New York for a 4-day fact finding mission.
- 2019 stats show that the gender pay gap continues 14th Jan 2020 Recent research by Starling bank shows that in 2019, women earned up to £12,319 less per year than their male colleagues of the same age and within the same industry
- Digital DNA Awards 2020 nominations now open 13th Jan 2020 The Digital DNA Awards, held in partnership with MCS Group, celebrate the best tech talent, from companies of all sizes, excelling in the world of Digital and Tech and not just in NI...
