Crowdfunding, as a concept, is something that many of us have an understanding of through platforms such as Kickstarter and Indiegogo. People around the world can check out a campaign and if they like what they see, they can help fund the project. Usually the person or team behind the campaign will offer a variety of rewards depending on the donated amount. Video games, albums, books, gadgets, TV shows and many other endeavours have been successfully funded this way, circumventing the more traditional funding routes. But there is so much more to crowdfunding than most of us realize. It’s now also a viable method of raising money for your business.

Joining us on this episode of the number one small business podcast is Anthony de Souza, who has spent the last four years helping businesses tap into the potential of crowdfunding. As Anthony explains in this episode, there are several different types of crowdfunding each with their own specific models and benefits. Perhaps the two most famous types of crowdfunding are those based on donations, such as Just Giving, and those based on rewards, such as Kickstarter.

Donation based crowdfunding is, of course, not so relevant to small business, but it’s a great way for charitable causes to raise funds and awareness. Rewards based crowdfunding is where different rewards are promised for different levels of backing. This would apply to some business with an innovative new product, but certainly not all small businesses. Perhaps the two types of crowdfunding most pertinent to small business are equity based crowdfunding and peer-to-peer lending. With equity based crowdfunding, businesses create a campaign to attract investment from outside backers who will expect equity in the business in return. The biggest platform for this type of crowdfunding in the UK is Crowdcube, which has secured more than £126 million in investments for small businesses. Peer-to-peer lending or debt based crowdfunding is used predominantly by existing business that need investment. The biggest platform for peer-to-peer lending in the UK is Funding Circle.

As well as the possibility of gaining investment in your small business, there are a couple of other important benefits to crowdfunding. Firstly, you will be able to see if your business or idea is validated by the market. Are there enough people out there who need your products or services? A crowdfunding campaign is a great way to find out the level of interest after you’ve done your initial market research. Secondly, a crowdfunding campaign can increase your brand awareness and act as a marketing strategy in its own right. A really successful campaign could even be featured in the media, further building awareness.

According to Anthony, a successful crowdfunding campaign relies on the business owner choosing the right type of crowdfunding and also selecting the right platform within that type. Some businesses that could be successful on Crowdcube perhaps would not be successful on Kickstarter, and vice versa. It’s important to choose the right approach. All successful campaigns feature a video of three minutes or less that tells the viewer your story. You should spend around 60 days on setting up your campaign because you can only launch it once and you want to make sure that everything is set up for the best chance of success. The 30 days of the campaign is important too, but the campaign is more likely to succeed if the groundwork and preparation have been put in beforehand.

Crowdfunding is only going to get bigger, so it’s certainly a financing method that many of us could find helpful for our small businesses.

Issue Challenged in this Small Business Podcast:

How can crowdfunding help my business?

About Anthony:

Anthony de Souza is an expert in the area of crowdfunding. He works as a speaker,