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How to Use Crowdfunding to Fund Your Startup

Shanea Patterson is a writer based in New York. She's worked with clients like Instacart, Tailwind, Columbia, Esurance, and LifeLock.

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Starting a business without capita can be a challenge. But thanks to technology, small businesses can raise capital and get donations from practically anywhere in the world.

If you've never considered crowdfunding for your startup, it might be time to reconsider it as an option to help fund your startup.

Benefits of Crowdfunding

Crowdfunding has several benefits:

  • Often has minimal upfront fees
  • Your funds are protected when you use a crowdfunding site
  • There’s very little financial risk involved

Now that you know the benefits of crowdfunding, here’s how you can use it to fund your startup costs.

How to Use Crowdfunding for Your Startup Costs

1. Choose your crowdfunding method

a) Equity based – Offer ownership shares in your company in exchange for funds

b) Reward based – Reward donors with products or services in exchange for contributions

c) Donation based – Solicit small donations from lots of contributors

Steps to Using Crowdfunding

Take a look at the step-by-step process we’ve outlined below for using crowdfunding to fund your startup.

1. Plan Your Goals and get platform approval for the campaign two months in advance

Determine what your funding goals are. How much money do you need exactly to get your business up and running? What things are you going to spend the funds on. Planning properly can answer all of these questions and more.

2. Solidify your idea – think about competition and your limitations

After you’ve planned your funding goals and get platform approval, it’d be a good idea to solidify your idea. Do some research. Determine what sets you apart from other companies doing the same thing. Then, find a way to incorporate that into your brand story.

3. Define your audience

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Before you can develop your brand story, however, you’ll need to define your audience. Because if you don’t know who you’re writing to, you won’t know what to say or how to persuade them to donate to your campaign. Determine who your target audience is by filling out a buyer persona or two. That’ll help you get a clear picture of who you’re writing to and for.

4. Develop your brand story

Now that you’re clear on who you’re writing to, it’s time to get clear on how to develop and frame your brand story in a way that helps people see you as an authority in your industry. A brand story can help contributors connect to your campaign and give them a reason to donate. Try to include things in your brand story that help highlight who you are as a company and what you hope to help people accomplish with your product or service.

5. Time your campaign strategically

After you’ve figured out the final details of your crowdfunding campaign, you can time your campaign strategically.

So what does that mean exactly?

Timing your campaign strategically means knowing that the platform you’re using may take a few days to get approved. So keep that in mind so you don’t lose a few days because oftentimes, campaigns have an expiration date. On most sites, they only last about 40 days or fewer.

6. Promote your campaign (and adjust funding goals if needed)

Once you’ve decided on a campaign date, you can start promoting your campaign (ahead of the approval date). Before the campaign goes live, spread the word to as many people as possible. Post links on your social media pages and across platforms. Spend some time researching the best methods for promoting a crowdfunding campaign.

7. Offer good rewards and communicate with backers

If you want to entice people to contribute the most money, offer good rewards. And make sure to communicate with all your backers and keep them in the loop. Oftentimes, they’re just as invested as you in seeing things through to the finish line.

8. Understand the rules and guidelines

In order to run a successful crowdfunding campaign, you need to understand the rules and regulations so there are no surprises later down the line – or something that causes you to lose access to your funds.

Getting Your Own Funding

Now that you know how to use crowdfunding to fund your startup, you can start taking steps to plan your own crowdfunding campaign. Using the above step-by-step process can help you raise the capital you need for your startup the right way and avoid making costly mistakes.

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

© 2022 Shanea Patterson

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