Crowdfunding

Crowdfunding is a way of financing projects and businesses through small contributions from a large number of backers, rather than large amounts from one or a few sources. It is generally done through dedicated crowdfunding websites or ‘platforms’.

Crowdfunding can take the form of a donation, equity purchase, loan, or pre–ordering of a product or service being produced, for example a music album.

Reward model – this allows people to contribute to projects and receive non–financial rewards in return, for example some free loaves for investing in a bakery business. 
Lending model – individuals or businesses apply through the crowdfunding platform and members take small chunks of the overall loan at an agreed interest rate.
Equity model – this involves investment for equity or profit/revenue sharing in the business. 

The majority of platforms operate an ‘all–or–nothing’ funding model where a target amount is set out at the beginning of the fundraising campaign and if this is not met or exceeded in a given time period, funding does not proceed and backers get their money back.

There is a wide variety of crowdfunding websites so do your research to find the one that’s right for what you want to do. Platforms generally take a cut of the money raised if the fundraising campaign is successful. 

Find out more

NESTA have an online directory of crowdfunding platforms, as well as a guide to crowdfunding which includes some top tips such as:

  • Budget – before you think about launching a crowdfunding campaign, make sure you have a realistic budget in place.
  • Choose the best platform for your campaign – before you launch your campaign, think carefully about which platform will be best suited for what you are trying to achieve.
  • Clarity and transparency – be clear on what you are trying to achieve and how the money you raise will be used.
  • Tell a compelling story – make a short and engaging pitch that outlines your plans.
  • Pre-launch – get potential funders interested long before you launch your fundraising campaign.
  • Segment funders – get your core community of backers to donate early on to demonstrate momentum to other potential backers.
  • Market and target – use mail outs, blogs and social media to spread the word.
  • Use stretch targets – break your funding goal into multiple targets to gauge appetite from your backers for different variations of the project and increase the total amount you can raise.
  • Communicate with your backers – keep engaging and communicating with your funders when progress is going well but also when it is not.Learn from other campaigns – before, during and after your fundraising there will be lots of easy wins for your campaign in copying what has already worked for others. 

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