So you’ve got a great idea for a new product, service, or business…but you lack the funds to get it off the ground. Without money in the bank, you worry that your idea will never come to fruition.
One solution might be crowdfunding. Another might be traditional fundraising. While the internet often uses crowdfunding and fundraising to mean the same thing, there is a distinction. Crowdfunding typically involves raising money for a business idea or project via social media or a crowdfunding site. Fundraising, on the other hand, is generally used by nonprofit organizations to raise money to support people in need or community projects.
If you’re an entrepreneur with a business idea or project that will support your local community (or the planet), you may be able to do both. Here’s a look at ways to use crowd-based fundraising to get your new venture off the ground.
Image Credit: DepositPhotos.com.
How Crowdfunding Works
To start a crowdfunding campaign, you typically need to create a page on a crowdfunding site. You may also want to make a video explaining why you need the money and what you plan to do with it to bring your campaign to life.You also usually need to set a fundraising goal, which is the minimum amount you need for your project. It’s important to set it high enough, but not too high. If you don’t end up meeting your goal, many crowdfunding sites send all contributions back to the donors.
Once you’ve set up your page, it’s generally up to you to promote your campaign to your networks, including friends, family, and professional contacts, via email and/or social media.
Image Credit: designer491/istockphoto.
Pros and Cons of Crowdfunding
Using crowdfunding to raise funds for your business idea has a number of benefits, as well as some drawbacks. Here’s a look at the pros and cons.
If your business is new or you don’t have strong credit, you may not qualify for traditional types of small business loans. With crowdfunding, you don’t need to have any business history or strong credit to start raising funds. And, with rewards crowdfunding, you don’t have to pay the money back.
Another benefit of crowdfunding is that it can help you raise awareness and excitement for your business or project, while also giving you a chance to test out your idea and see how people are responding to it.
If you need more capital in the future, having a successful crowdfunding campaign under your belt could help convince a lender to approve you for a business loan.
On the downside, it can take a fair amount of time and effort to create an attention-getting and successful crowdfunding campaign. In addition, there may be costs involved in launching your campaign — especially if you choose to make a high-quality, high-impact video — with no guarantee of any return.
Also keep in mind that, with many crowdfunding sites, you don’t get to keep any of your donations if you don’t meet your fundraising goal. Even if your campaign is successful, you typically don’t receive 100% of each crowdfunding donation. Crowdfunding platforms generally keep a small percentage of your donations as a service fee.
Image Credit: fizkes/istockphoto.
9 Fundraising Ideas
While online crowdfunding can be a great option for startups, you may also want to consider raising funds the old-fashioned way – with in-person events.
Like online crowdfunding, this can give your business idea exposure and generate excitement for your project. If your business venture will benefit the community (or the planet), you may be able to borrow some ideas from the nonprofit fundraising world, keeping in mind that as a for-profit business, you follow different tax rules and regulations.
Here’s a look at some fun local events that may help you raise money for your business venture.
Image Credit: alvarez/istockphoto.
1. Host Workshops
This idea can work well for B2B as well as B2C businesses. If you’re launching a B2B business, you might host a workshop in your area of specialty — such as teaching small businesses how to use social media, set up a website, or manage their finances — and charge each participant a fee. If you’re launching a B2C business, you could create a workshop focused on your area of expertise, such as showing people how to make beauty products, take great photos, or train their dogs.
Image Credit: triocean/istockphoto.
2. Put on A Local Concert
Another in-person fundraising idea is to hold a local concert. If your business idea or project is community-focused and serves an important unmet need, you might be able to get a local musician or band to donate their time for the event. Charge for the event, as well as for refreshments, and you might be able to raise a sizable sum.
Image Credit: piola666/istockphoto.
3. Host A Game Competition
This can be a fun way to get people in your community involved in your startup, and raise funds at the same time. The game event could include board games, relay races, scavenger hunts, or any other type of competitive activity. Participants would pay a fee to participate, which would go towards your fundraising. You could provide prizes to winners without spending too much of your budget
Image Credit: Capuski/istockphoto.
4. Hold A “Pay It Forward” Sale
If your business serves the public, you might be able to boost sales with a “pay it forward” sale. Encourage people to buy one of what you sell (such as a coffee) and another for someone else on line, offering a discount on the total. People often enjoy doing random acts of kindness, and this kind of promotion can also generate positive associations with your brand.
Image Credit: Milko/istockphoto.
5. Organize An Art Auction
If your business idea will better your local community or — better yet — the local arts scene, you might consider asking local artists to donate work for an auction. You can run the auction as part of a ticketed event, such as dinner or cocktail party. Or, you could run an online art auction.
Image Credit: SERCAN ERTÜRK/istockphoto.
6. Get People Running, Walking, or Hiking
People often love an opportunity to get out and walk, hike, or run for a good cause. If your business has a positive, community-focused mission, you may be able to raise money by hosting a local walkathon, hikeathon, or runathon. Rather than have participants raise funds (the way nonprofits often run these events), you can have them simply pay a fee to participate.
Image Credit: FatCamera/istockphoto.
7. Donate a Portion of Your Proceeds
People may be more motivated to patronize your business if you make it known that your company is dedicated to giving back. Consider offering a promotion where, for a certain period of time, you will donate a portion of all sales to a cause that matches your brand’s mission.
Image Credit: SDI Productions/istockphoto.
8. Sell Apparel
You may be able to raise seed money for your business idea by selling t-shirts or other apparel (such as hats, jackets, or bags) that have your company’s name and logo or simply a great slogan that represents your brand. You could sell them through your website or at local events.
Image Credit: Anatolii Frolov/istockphoto.
9. Rock Out with a Battle of the Bands
This in-person crowdfunding idea not only helps you raise the money you need but also gives up-and-coming local musicians the chance to shine. Singers and bands pay a registration fee to participate, and you can also charge admission.
Image Credit: gilaxia/istockphoto.
Even if your business is still early-stage, you may be able to raise the funds you need to take it to the next level through online crowdfunding and/or in-person fundraising.
Also keep in mind that, whatever stage your business is at, you may be able to raise capital by bringing in an investor or getting a business loan, such as a startup loan or loan backed by the U.S. Small Business Administration (SBA).
Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Advisor
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.
Communication of SoFi Wealth LLC an SEC Registered Investment Adviser. Information about SoFi Wealth’s advisory operations, services, and fees is set forth in SoFi Wealth’s current Form ADV Part 2 (Brochure), a copy of which is available upon request and at www.adviserinfo.sec.gov. Liz Young is a Registered Representative of SoFi Securities and Investment Advisor Representative of SoFi Wealth. Her ADV 2B is available at www.sofi.com/legal/adv.
Image Credit: nortonrsx/istockphoto.
More from Mediafeed
Image Credit: Jovanmandic/istockphoto.