When looking for financing sources these days, you have the opportunity to use traditional forms of financing (bank loans, enterprise allowances, etc) or use alternative ways to fund your your product (eg. crowdfunding). Crowdfunding is the practice of funding a project or venture by raising monetary contributions from a large number of people, typically via the internet. Crowdfunding is a form of alternative finance, which has emerged outside of the traditional financial system.
When crowdfunding your project you should be aware of some prerequisites:
1) Be specific
Your idea should be concrete. Your idea should be a product. You should have evaluated how you can manufacture your product, and who’s part of your supply chain. Furthermore you should present your team and your skills, your experience and of course your idea in a magnificent way.
2) Be viral
In order for your product to go viral, it should be easily explained in 2-5 sentences and supported by pictures and a nice video. (Internet-)Promoters should help you to distribute your idea over several social media platforms. If you don’t have a large network, your promoters should. Be aware that crowdfunding is about reaching out to the crowd.
3) Be honest and thankful (to your investors)
You enter into an obligation – and your investors have expectations – they invest in you and your product, because they trust you. Do not forget to check the legal necessities in your country eg. if you need to prepare a investment memorandum or not, etc.
4) Be results oriented
Your product should (must) come to live. Of course a (short) business plan is necessary to make sure that you can achieve your goals with the required funding. Remember that you do not need equity to crowdfund a project.
Investors decide if they want invest in your product based on the following parameters:
- Do they believe in the product?
- Do they believe in you? – Are you able to deliver the product?
- Is you product adressing an societal issue or will the demand based on other factors?
- Is it a one time product or not?
- And of course, finally, whats the return (money, goodies, product)?
Crowdfunding is a good alternative way to fund your project. However is also timeconsuming in it’s preparation and during the funding period. A good preparation helps achieving the funding goals.
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