Funding your entrepreneurial dreams or start-up can be tough if you’re just starting in business.
Money sometimes doesn’t always take you as far as you imagined it to, and loans to kickoff your business often have many requirements such as minimums for credit scores and required collateral. That’s why utilizing crowdfunding techniques for your business is favorable among aspiring and even experienced entrepreneurs.
Crowdfunding techniques, if done right, can draw interested investors straight to your bank account.
Online platforms like indiegogo or patreon require a fee for your crowdfunding campaign to be hosted, allowing potential investors to learn more and contribute.
You can gear the campaign almost any way you like, and there are less strings attached to raising funds compared to obtaining a loan or gaining investors in alternative ways.
Here are the three main types of crowdfunding:
- Equity crowdfunding: Use this type of crowdfunding to offer ownership shares in your company in exchange for funds. Here, there is no need to repay loans that are more costly to your business but funding these pitches requires a lot of info about the operations of a company.
- Donation crowdfunding: This type allows you to solicit donations that are smaller from a larger amount of contributors. A pro of this type is that donated capital does not need to be reimbursed, however, these donations can be lower than funds from other sources.
- Reward crowdfunding: Allows you to entice donors with services or products to reward their contributions. Utilizing these rewards can in turn attract more attention to your business. Something to keep in mind is that in order to raise a large amount of money, you need a massive donor base.
Knowing these three types are helpful to steer you in the right direction when choosing the best method for your startup idea.
Courtesy of LegalZoom, check out the infographic below.
You can also explore more valuable tips from experts including pointers for creating a crowdfunding campaign and the important regulations by reading crowdfunding tips for businesses.
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