What is Crowdfunding and should you use it?

Here at the Carolina Textile District, we have noticed the rising popularity of crowdfunding amongst our clients. We thought it would be helpful to write a piece about raising money online.

Crowdfunding is a way to raise money by having folks from anywhere pledge as little or as much money as they would like to reach your fundraising goal. Reaching your goal, which is often a requirement to getting any of the money, can be tough, but we have seen clients succeed (we’re looking at you WildlyCo.). Here are a few helpful tips on how to create a successful crowdfunding campaign.

“Crowdfunding” has become a wildly popular way of expanding businesses.

Today’s entrepreneurs have found many ways to use the Internet to their benefit, from free market to even raising the money to start their business. The trend of getting donations for your business is called “crowdfunding” and it has become a wildly popular way of expanding businesses in the last 5 years, especially through sites like Kickstarter.

Generally, people are asked to make a small donation, anywhere from $5 to $100 and they usually receive something in return. For example, if someone is launching a t-shirt line they might give t-shirts to anyone who donates $20 or more. Some of our clients in the Carolina Textile District have opted to use this way of raising money to start their fashion lines or launch new products. While it may seem like a no brainer to go this route, it does have it’s faults as well as it’s benefits.

What makes crowdfunding a good option?

1. It’s a way to connect your business to more folks.

The beauty of the Internet is that it allows for you to create and maintain relationships that you otherwise would have never had access to any other way. Whether it’s someone who shares the same interests, might purchase your products in the future, or just likes your gumption and wants to help you out. Basically, more eyes on you creates more opportunity for you to grow.

2. Helps you put your best foot forward for marketing.

Creating a campaign to ask people for money means that you have to have all your ducks in a row. Your campaign page needs to be well made with a well-told story. Folks want to know that they’re donating to a business that has it together and has the potential to make it. This takes time, but once you have it together it helps you on future projects as well.

3. Provides access to funding that isn’t a loan.

Taking out loans isn’t quite so easy these days for small businesses, and it also is a huge risk for a start up to take. Crowdfunding provides a nice alternative to raise some of the money needed for your business without any debt hanging over your company. Many Internet campaigns offer small rewards for investors, from thank you cards to one of the items being produced. It helps strengthen the relationship between funder and company.

What makes crowdfunding difficult?

1. Networking! Networking! Networking!

It’s important in business to build relationships, and it is especially important when it comes time for fundraising. It’s also important to understand what each relationship in networking actually provides for your business. Not every contact you make needs to be an investor or a potential client. When it comes to crowd funding it’s just as important to build strong relationships with those Internet gurus who are good at helping to spread the word. Find the bloggers, social media masters and technology gifted people and make strong relationships with them. The Internet is a huge source of free market, tap into it!

2. Get over the fear of asking for money.

One of the hardest things to learn in business is when and how to ask for money. For some it may be an issue of pride and for others it’s a fear of hearing the words “no”, but this isn’t the time to let these things stop you. If you have a vision, a solid business plan and the drive to start a new business, then share it with people and allow them the opportunity to contribute. Learning to hear the word “no” in business is also one of the most valuable skills to have, so toughen up and go ask!

3. It takes time!

Remember when we said that one of the benefits is having your communications and marketing plan in tip top shape? Well that takes time for planning and executing. Once that’s over with, your campaign takes time to manage and grow. Many sign up for crowdfunding with hopes that it will go viral and take care of itself, but that’s not how it really works. So if this is an avenue you want to take, make sure you have the hours in your week to dedicate to it. Crowdfunding might not be the best option for your company, but it is a great option. Take the time and do your research, find what crowdfunding website works for you (kickstarter, indiegogo, etc) and then map out a plan. Any move you make when building a new business takes thoughtful planning and time management, crowd funding is no different, but the rewards can be great!

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What This Means in the Carolina Textile District.

We are happy to share your crowdfunding events on our social media accounts if it pertains to work that will happen in The District. We also will post it once it is funded 75% to help push you over your goal line. For more information on crowdfunding websites check out this article with Forbes Magazine.