The beginner’s guide to crowdfunding (Infographic)

Image by Tumisu from Pixabay

By Makenzie Pohl

When it comes to starting a business, oftentimes funding is an issue. As your company grows, so do your costs. At this point, you might consider taking out a loan. While that is a viable option, loans often entail debt with high-interest rates. For this reason, you may want to consider fundraising alternatives such as crowdfunding.

There are different types of crowdfunding options, each with its pros and its cons.

Types of crowdfunding

– Equity crowdfunding: With equity crowdfunding, your investors supply you with funds in exchange for shares of your business. This can be advantageous because it means you don’t have to worry about paying off debt from loans. Additionally, your investors might prove to be valuable sources of business advice down the road.

On the other hand, if you’d rather not share company ownership with others, you may want to evaluate your other options.

– Donation crowdfunding: When it comes to donation crowdfunding, you acquire funds through donations from interested parties who believe in your company. This method works best when your business has a charitable mission or is working for the betterment of your community. The money earned from donors is no strings attached, meaning you don’t have a debt to pay and nobody is receiving ownership interest with your company. That being said, it can be difficult to raise the capital necessary to grow your business solely through donations.

– Reward crowdfunding: Reward-based crowdfunding is similar to donation crowdfunding, but donors receive a product or service for their contribution. It’s the most popular form of crowdfunding, and If you’re familiar with Kickstarter then you understand how powerful it can be. This type of crowdfunding has more potential to raise money than donation crowdfunding, but it can be an all-or-nothing endeavor. If you run a campaign on Kickstarter, for example, if you don’t reach your monetary goal then you don’t get any of the funding pledged by your donors.

While it’s important to understand the various types of crowdfunding, it’s also crucial that you employ the right branding tactics when launching your campaign. To learn more about crowdfunding for businesses, check out the infographic below.

 

guide to crowdfunding

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Makenzie Pohl is a content creator who develops helpful and compelling stories. Her passion for digital marketing and creative writing has led her to cover unique topics ranging from travel to lifestyle. She calls San Diego, CA, home and enjoys dining out, photography and traveling in her spare time.

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