You have an idea and a plan. You have it all figured out. You even know the product's name, but you have a small problem: how do you finance it all?
Crowdfunding is an alternative financing model that aims to make raising funds for a company trying to market a particular product easier. In other words, if a company has an idea for a specific product and does not have the funds, it turns to crowdfunding platforms such as Kickstarter, Indiegogo, RocketHub, GoFundMe, etc.
Crowdfunding brings together primarily small investors, most often ordinary citizens, who invest their money in an idea.
It may not sound epochal, but keep in mind that the power of crowdfunding is not in the amount of money but in the number of people!
The crowdfunding platform provides an opportunity to create a relationship between two parties: the company and the donors (citizens). It is important to note that the site, www.kickstarter.com, provides only a fundraising platform but does not have a contractual obligation to the persons financing the project. This relationship is created between citizens who give money and the company that takes the money for the needs of its product. When a company decides to take this step, it must present the following to potential investors:
A good business plan: although it is not a bank, crowdfunding allows you to raise funds. Bearing in mind that you have thousands and thousands of potential investors at your disposal, it is essential to have a detailed business plan to let investors know that you are not just there for short-term benefit, which will increase the campaign's chances of success. The business plan will help you because it will set clear restrictions on budgets and deadlines.
Clear deadline: your donors need to know when you plan to complete the prototype or when you plan to market a product. This is especially important for those donors who may want to buy a stake in your company at some point.
Concrete product: your product must be clearly defined and “visible”. We put quotation marks because sometimes the product is in a prototype phase. If this is the case, you need to have precise sketches, technical drawings, and specifications on which donors can assess whether your product has potential.
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