Everything You Wanted to Know About Crowdfunding [Infographic]

  • October 12th, 2011
  • Dan Bischoff

As banks have tightened terms over the last few years, alternative loans are quickly gaining in popularity. So much so that banks are noticing the competition, and starting to loosen their belts. Crowdfunding is one of the newest alternative loans, which are very similar to peer to peer loans. Our friends at Intuit have designed a great graphic detailing everything you’d want to know about Crowdfunding:

What is Crowdfunding?

via: Crowd Power: What Is Crowdfunding? [INFOGRAPHIC]

Crowdfunding is a term used to describe individuals coming together to support — and directly fund — projects by other individuals and organizations. For small businesses and startups, crowdfunding can be an engine for job creation and development.

The Evolution of Crowdfunding

The concept of crowdfunding isn’t entirely new. It’s come about thanks to a progression of other funding ideologies, i.e. microfinancing, microlending, peer-to-peer lending.

The Nuts and Bolts

Prospective and established small business owners can use crowdfunding platforms to jump start their next project. Three models of crowdfunding:

  • Donations, philanthropy and sponsorship
  • Lending
  • Investment

The Pros and Cons

Pros: a platform that also serves as a marketing tool, provides a forum for feedback on the project, relatively inexpensive way to raise funds.

Cons: Often limited on amount of funding you can raise; exposes project to the public, risking copycats; funds may be subject to securities regulation.

Does it Work?

At a glance, as of April, 2011: $53 million was pledged, $40 million was collected, and 20,371 projects. 43% of all projects are successful, 52% of projects with one pledge succeed, 90% of projects that reach 1/3 of needed funding succeed, and 21 percent of projects don’t receive any pledges.

How to get Crowdfunding

Chose the right site for you

    : Some sites have focus such as arts or nonprofits. Find the one that fits your business.

Set a realistic target and time limit: Asking for too much or too little can affect your project’s chances of success.

Create a campaign video: A personal touch pays off. Projects with videos outperform those without by 125%.

Post regular campaign updates: Keep supporters engaged and maintain momentum.

Connect with friends and family first: Begin with word of mouth among your inner circle, then promote your campaign on social media.

Offer Rewards: Supporters may be more eager to back you if you offer a small incentive.

About the Author

  • Dan Bischoff

Comments

  1. Very informative, thank you!

  2. I will definitely try this avenue of funds-raising for my for-profit company-to-be, in the field of anti-obesity, fitness, exercise, all enabled by Patent Pending technologies.

    If anyone has questions, I would be delighted to respond. Just contact me at [email protected] .

  3. wow i never new about this maybe its for me

  4. like many, funding by once dependable bank sources has become less than dependable for our business. We will look into the feasibility of making something like this work for us.
    We have a great small business with website and cart but with modest results. came into this industry with no experience, superior product and tireless desire to make it work. We started at the beginning of the economic downturn andhttp://swissclinicalusa.com/
    any ideas out there?

  5. I Need Help With Equipment I Am Federal Contractor Working Contracts With Fema Debris Construction

    • Bobby, have you signed up for a Lendio account yet? It’s free, and we have a lot of lenders in our network that provide equipment loans. Let me know if you want some help going through the process.