2023
3/15

Forget the Banks: Why Crowdfunding is Now a Top Source of Business Funding [Part I]

Created BY: AbdelRahman El-Mwawi



Crowdfunding is the practice of raising small amounts of money from a large number of people to fund a project or venture. Startups, entrepreneurs, and creators leverage crowdfunding to finance their ideas and gain support from backers around the world. While traditional funding options may not be available, crowdfunding offers an alternative path to raising capital and validating ideas.

The basic idea behind crowdfunding is 'the crowd', a pool of regular people, not wealthy investors or institutions, coming together to finance projects and businesses that inspire them. In return for their pledge of money, backers usually receive rewards or early access to products. As the number of people contributing aggregates into large amounts, this "crowd-sourced" financing allows projects that would not otherwise be possible. In the age of social media and global connectivity, the reach of crowdfunding campaigns can spread farther and wider than ever before.

Check our Guide on Market Validation for New Entrepreneurs | How to Validate Your Startup Idea

However, even though there are many ways to improve your campaign’s chance of success, there are multiple things experts recommend relying on when conducting crowdfunding. Experts recommend following the steps below to get the best out of crowdfunding.

Step 1: Research & Planning
Step 2: Set A Funding Goal
              Crafting the perfect funding goal for your crowdfunding campaign: Expert advice
Step 3: Create a Compelling Story
              Crafting a Narrative That Connects: Pro Guidance on Writing a Winning Crowdfunding Campaign Story
Step 4: Gather and Leverage a Support Network
              Building Your Tribe: How to Cultivate and Harness a Strong Support Network for Your Startup
Step 5: Choose the Right Crowdfunding Platform
              A Comprehensive Guide to Selecting the Perfect Platform for Your Startup's Success                            
              Exploring Equity Crowdfunding Platforms for Your Next Big Idea
Step 6: Launch & Promote
              From Launch to Lift-Off: Proven Strategies for a Successful Crowdfunding Campaign
Conclusion: Launch with Confidence
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Step 1: Research & Planning

Research and planning a crowdfunding campaign for a startup is an important step in the process of launching a business. It involves researching the market, setting a goal for the campaign, creating a budget and timeline, and planning the promotion and outreach for the campaign. It also involves researching the different crowdfunding platforms available and selecting the one that best meets the needs of the startup.

Before launching a crowdfunding campaign, it's important to conduct thorough research to understand the market, competition, and target audience. This research will inform the planning process and help to create a strategy for the campaign. It is important to understand what similar products or services are on the market and what sets your startup apart. This information will help you create a unique value proposition and determine the best way to present your product or service to potential backers.


                        


Crowdfunding platforms have revolutionized the way that startups and entrepreneurs raise funds for their innovative products and services. These platforms offer a way for businesses to connect with potential backers and supporters from all over the world, making it easier than ever to secure funding for their projects.

There are a variety of crowdfunding platforms available, each with its own unique features and benefits. Some of the most popular platforms include Kickstarter, Indiegogo, GoFundMe, and Crowdfunder. These platforms offer different types of campaigns, such as reward-based crowdfunding, equity crowdfunding, and donation-based crowdfunding.

Step 2: Set A Funding Goal

Setting a fundraising goal is a key aspect of crowdfunding your startup. Without a goal, it will be impossible to measure your success. It will also be hard to figure out how much money you need to raise. There are a few things to consider when setting your fundraising goal:

What is the amount of money your business may need to get started?
What amount can you realistically raise?
How much money you need at the minimum/maximum to reach your goal?
How long would your campaign run?

                                          

Crafting the Perfect Funding Goal for your Crowdfunding Campaign: Expert Advice

  • Base it on your real needs. Calculate the minimum amount of funds you need to achieve your startup goals. Account for costs of manufacturing, marketing, and other expenses. Don't set an unrealistic goal.
  • Include a buffer. Add a buffer of 20-30% extra to your calculated needs in case of unexpected costs or delays. This gives you more flexibility and a higher chance of achieving your goal.
  • Consider stretch goals. Set one or two stretch goals in addition to your main goal. These are higher goals that can help you raise more funds and achieve even more if you exceed your main goal. But only set stretch goals that you have concrete plans for using the additional funds.
  • Build in rewards at different levels. Have a range of reward levels for backers to choose from at different pledge amounts. This encourages backers to pledge higher amounts and can help you reach your goal faster.
  • Promote and market your campaign to boost visibility. A crowdfunding campaign's success depends a lot on effective marketing to drive traffic and get pledges, so you need to dedicate time and effort to promotion for the best chance of hitting your goal.

Step 3: Create a Compelling Story

 

“Most giving is 80% emotion and 20 % rational. And the best way to get to someone’s emotions is to tell a story.” — Unknown

Facts are a good, even necessary, basis for inspiration. But facts are not enough to get others to open their wallets. In order to achieve financial support, connect with them on a deeper level, while also furnishing them with the information they’ll need to understand the problem you solve. How does your product or campaign address this challenging issue?

How does your planned endeavor encourage your readers or your target markets to attract their purpose? Why is it something they will simply have to witness? Make your potential finances ready to fund your story.

                


Crafting a Narrative That Connects: Pro Guidance on Writing a Winning Crowdfunding Campaign Story

  • Share your vision. Explain the vision and motivation behind your startup and project. What problem are you trying to solve? Why is it important? Help people understand the impact and purpose of your work.
  • Build an emotional connection. Don't just share technical details, but also create an emotional connection between your story and the reader. Talk about your passion and team, share examples of how your work helps people, and use engaging language and images to draw the reader in.
  • Highlight your achievements. Show how far you've already come. Share your progress, milestones achieved, and any traction or success you've had so far. This helps build credibility and confidence in your ability to deliver.
  • Explain your plans. Share your detailed plans for how you will use the funds raised to achieve your goals. Be transparent about how the money will be spent and what it will be used for. This accountability helps gain trust from backers.
  • Keep it concise. While you want to share a compelling story, keep the overall length concise and focused. Don't drag on for too long, get to the key points quickly and avoid being too verbose. Keep things punchy and impactful for the best engagement.


Step 4: Gather and Leverage a Support Network

When crowdfunding, every inch of your network should be used.

Your acquaintances (family, fellows and community) can share your campaign with their own networking circles. Through your network, you may find an entryway to networks of others; an approach that will help build momentum and awareness.

When people get exposed to your campaign, do not make donations, they can share it with their colleagues. This could be just as valuable. Your visibility gets maximized from those who may not recognize your company; engagement can then be increased.

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Building Your Tribe: How to Cultivate and Harness a Strong Support Network for Your Startup

  • Tell everyone you know. First, tell your own personal network about the campaign. Your friends, family, and acquaintances are more likely to support you and spread the word.
  • Build momentum early. Try to get some initial pledges and traction as early as possible in your campaign. Early momentum can help convince others to join in and makes it more likely you'll reach your goal.
  • Reach out to influencers. If your business or project has influencers or celebrities who believe in your mission, see if they are willing to publicly support and endorse your campaign. This can bring more attention and backers.
  • Partner with other businesses or organizations. See if other businesses or non-profits in your space would be willing to partner to cross-promote to each other's audiences. Collaboration and networking can help amplify your campaign's reach. Contact ITIDA for partnership opportunities
  • Stay engaged throughout. Keep engaging your networks and audiences throughout the duration of the campaign. Send updates, share new materials, and respond to comments and questions to keep momentum going and continue attracting new backers up until the end of the campaign.

Constant engagement and using a variety of methods to reach new potential supporters can help create a strong support network for your crowdfunding campaign. With more people aware of and backing your campaign, the more likely you'll be to achieve success.

Check out EgyptInnovate innovation map to get connected with potential funding entities