There is a lot of talk these days about the potential to use the big Crowdfunding platforms like Kickstarter to gain capital for an idea you want to bring to the market. In some cases, it can be a great option that not only means you can get the capital you need without having to find loans or give away shares in your business, but can also help you gain publicity for the thing you are doing before your product is even available to buy. However, as good as crowdfunding may sound, it isn’t suitable for every kind of idea, and can also take a lot of work if you want to actually raise the money you need.
Here are some things you may need to know to be able to decide whether crowdfunding with Kickstarter, IndieGoGo or one of the other well known platforms is an option for you:
Crowdfunding Platforms Are for Projects, Not Businesses
One thing many people don’t understand is that the big crowdfunding platforms where you are likely to get a lot of people looking at your proposal, only accept projects with a set deliverable. What this means in practical terms is that you can set up a Kickstarter to develop a game or an app, but not to start a software company that is going to be working on lots of projects, or a consultancy that builds bespoke apps for businesses. Each project must result in a product, and have an end date. This means that if your idea is centered around one product, you can use crowdfunding to get capital to develop that product, and that alone. Whether you then continue as a business and do other products or offer services is up to you, but cannot be factored into your crowdfunding campaign.
You Are Committed to Giving Rewards
When you raise money using crowdfunding, you don’t have to pay it back when you have completed your project. You do, however, have to give people the rewards you offered when you ran your campaign, one of which is usually the finished product you were going to create. This is one of the key points when it comes to the matter of IndieGoGo vs Kickstarter: with Kickstarter you only get the money if you reach your campaign goals, so while you may get nothing if you don’t get enough backers, you will have enough money to develop your product if you succeed. With IndiGoGo you get any money that is given to the project no matter how far off your goal you are, which sounds great until you realize you may have to give backers their rewards with a tiny budget.
If you do decide a crowdfunding campaign suits what you want to do, then do your research, and prepare to launch it! Be prepared, however, that both preparing and managing a campaign is like running a full time business, and you may not have much time for other activities on your project while you are promoting your campaign.
Crowdfunding is a great idea for a lot of projects, but make sure you understand these key points before you rush into it!
SimonSimon writes about tips, step by step guides and his experience in the field of online marketing. For more information click here.
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