When it comes to funding a business or project, there are a wide variety of options. This includes everything from raising the money yourself to getting a loan from friends, family, banks, or investors. Starting in the late 2000s, a new option developed known as crowdfunding. Let’s take a look at what this term means and how Awesome Website Guys supports these companies.

What Is Crowdfunding?

Crowdfunding refers to the process of raising money from a large group of people, such as friends, family, individuals, and companies. Collectively, this large group of people invest small individual investments that combine to provide enough capital necessary for a business or project to kick off. You can create a campaign for a specific cause and anyone is welcome to contribute to helping you reach your crowdfunding goals. 

The traditional model required people to invest extensive time, money, and energy into gaining financial support from wealthy investors or bank loans. This process was difficult and would usually take long periods of time before businesses received the necessary funds. With crowdfunding platforms, this process is streamlined and much more efficient. Indeed, companies have a central virtual location to build, promote, and share their pitch resources with individuals from all over the globe. Those that are interested in supporting a specific business or project will find it easy to do through a secure, reputable crowdfunding platform used by millions of people.

The Different Types of Crowdfunding

There are a variety of different crowdfunding types, which will help individuals determine the best type for their business or project goals.

Donation-Based Crowdfunding

Donation-based crowdfunding refers to a crowdfunding campaign that does not provide a monetary return to the investors or contributors. Examples of this type of campaign include charities, disaster relief, medical emergencies, and nonprofits.

Equity-Based Crowdfunding

Equity-based crowdfunding refers to a campaign that allows contributors or investors to become part-owners of a company by trading capital for equity shares. By becoming an equity owner, contributors will receive a financial return on their investments, as well as shares of the profits from dividends or distributions. The amount of return is based on how much the individuals contribute to a campaign. Some examples of this type include Fundable and Crowdfunder.

Rewards-Based Crowdfunding

Rewards-based crowdfunding is when individuals contribute to a business or project and receive a reward in exchange. This reward is generally the product or service directly related to the business. Since contributors do not receive a financial return or equity, this is considered a subset of donation-based crowdfunding. Common examples of this type include Patreon, Kickstarter, and Indiegogo. 

Tips to Supports Crowdfunding Companies

Whether you are a small business or individual, it’s important to research a crowdfunding company before you invest your money. Check out these top tips that will help you successfully support a legit crowdfunding campaign that you believe in.

Identify the Goal

On the top of the list, you need to know what funds will be applied to the company. This should be transparent to investors and contributors on the crowdfunding platform.

Research the Company or Project’s Team

It’s important to research the company’s team, as this will give you a big picture of the likelihood for a successful outcome. When researching, determine if the founder has the right team on board to achieve their goals. This involves having people that are experienced and qualified to support the team and execute the company or project’s mission. The wrong team members that aren’t experts at whatever the company provides (products or services) will be unlikely to succeed.

Identify the UVP (Unique Value Proposition)

What is the company’s UVP (unique value proposition)? Is the company disrupting a current industry or using technology in a new, fresh way? It’s helpful to identify what is special about the company. Also, the company should provide a unique solution to a current problem found in an existing market.

Research the Market and Traction

Like anything, a product or service needs to be in demand from consumers. If there is no interest, the company will struggle to be successful. You can research the existing market to determine if there is a need for their product or service. Additionally, you can determine the company’s traction for data on how well their idea has worked in the current market.

Verify the Credibility

Before you support any crowdfunding company, it is imperative to verify their credibility. Check out their website, social media channels, and listen to what other people have to say about them. It’s likely that the company is made up of individuals that already have established companies. This is a great way to see the success rate for their other businesses and determine how legit they are as business people.

As you can see, crowdfunding is an excellent way to support small businesses that have a solution to the world’s countless problems. At Awesome Website Guys, we pride ourselves in supporting other small businesses and helping them achieve their funding goals. We hope you found this article helpful, especially if you are considering supporting a crowdfunding campaign or looking to start one for your business. Learn more about our crowdfunding support at Awesome Website Guys based in Wilmington, NC today.