The Basics of Crowdfunding

Crowdrise can help.

What sort of projects can benefit from crowdfunding?

When it comes to small business projects, it's worth researching whether crowdfunding will work, and what platform to use.

Here are a few examples of situations for which it might be useful to consider crowdfunding:

• Funding a charitable event sponsored by your company.
• Getting people to invest in a start-up when you have a business plan but not enough capital.
• Obtaining the funds for a certain need around the office—a handicapped access ramp or new computer equipment, for example.
• Asking for donations for a colleague who is in need because of an illness, for instance.

What's the best way to help the crowdfunding effort work?

Now that you have your project in mind and your crowdfunding site identified, how will you get the word out to potential investors and donors that you need their help?

Make sure your needs are clearly spelled out on the project Web site. Let people know your exact goals; be specific.

Try to attach some sort of back story to the project. For example, if you're hoping for capital to start your own business, share with readers why that business is your dream. Creating an emotional connection with others will encourage them to fund your vision.

Use social media as much as possible to promote the project. You might want to create a YouTube video about your cause. Also, keep a blog so potential investors are aware of your progress.

Offer perks for different amounts of funding. With investment-based projects on sites such as Crowdfunder, your participants will share stock in your business. With donation-based projects, it might help to offer some kind of reward.

What if your crowdfunding doesn't work?

Don't fret if you don't reach your goal. Consider the likely reasons why your plan didn't work, and plan to do things differently the next time.

Here are some reasons an effort might have flopped:

• Your story wasn't convincing. A crowd will not fund something not viewed as worthwhile.
• There's no deadline. Creating urgency by setting a deadline will help everyone get serious about spreading the news and chipping in—not only the investors but you and your team as well.
• It's too similar to another project. If the project is exactly like another one your network of friends and business contacts recently encountered, they may be reluctant to participate again.

Remember, crowdfunding is not a "too good to be true" or "free money" concept. It requires hard work and dedication, both on your part and the part of your network. But with some organization and planning, sharing your potential with others could help you realize your own dreams.

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Diana Gomez is the marketing coordinator at Lyoness America, an international shopping community and loyalty rewards program. She is instrumental in the implementation of marketing and social media strategies for the United States and Canada.

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