Crowdfunding is quickly moving from alternative finance to legitimate funding source. Take advantage of the new opportunity and learn how to make money crowdfunding.
I usually cover the steps in launching a crowdfunding project and how to make money crowdfunding on my other blog, Crowd101. The recent passage of laws around equity crowdfunding investing could mean a surge in investors and projects, making it a potential part of your personal finance plan.
This post is the second of our five-week series on how to make money through different resources online. Money to crowdfunding projects continues to nearly double every year and is estimated to reach $300 billion by 2025 from $10 billion last year. Within this huge new source of funding is money for businesses, personal projects and social causes.
I was recently surprised by a poll by small business community Manta that reported less than 3% of business owners have used crowdfunding to fund their business. Despite billions being raised for everything from tech start-ups to established businesses and even to make potato salad, many still do not consider crowdfunding as a legitimate source of funding.
You can take advantage of the lack of understanding to make money crowdfunding for just about any reason. Use this post to get started on how to make money crowdfunding for your business idea, personal project or social cause.
How to Make Money Crowdfunding a Business Idea
In case you’ve been living under a rock for the past several years, crowdfunding is a relatively new way to raise money online for projects. Sites like Kickstarter, GoFundMe and EquityNet offer platforms for people to post their project request. You write out why you need a certain amount of money, what you are willing to give people to support your project and other project details. The platform collects pledges to your campaign and you fulfill any product promises. The money doesn’t have to be repaid and your business or project benefits from the potential for massive exposure.
While many people hold the misconception that crowdfunding is best for start-ups, small personal projects and charity, it’s actually established businesses that have the most success making money crowdfunding. That’s because established businesses already have a lot of the marketing and community in-place that will help you raise money through the crowd.
Take All Crumbs Artisan Bakery for example. The Ohio bakery had been selling its artisan breads and pastries for years at a local farmer’s market but needed to raise money for a storefront. Having an existing presence and marketing helped the company crowdfund more than $6,000 from 123 people on Indiegogo. It may not be the hundreds of thousands or the viral outcome you hear about on the news, but it’s money that will help the company grow.
Besides the obvious benefit of money that doesn’t have to be repaid, the biggest benefit from crowdfunding your business is the potential for massive exposure. Crowdfunding platform Kickstarter alone gets more than 13 million monthly visitors. Your campaign page is an entire page dedicated to your message and your product and is absolutely free to post. Since only about 3% to 5% of page visitors decide to support, it’s likely that more than 4,000 people saw the campaign for All Crumbs Bakery. Pretty good for a business that doesn’t even have a storefront.
Finally, crowdfunding builds some of the most loyal customers you will ever find. People that support your project will feel a level of buy-in with your company because they helped make it happen. Try getting that kind of community from just any customer.
How to Make Money Crowdfunding a Personal Project
Raising money crowdfunding can take several months but you can crowdfund anything. Susan Milam raised over $3,400 crowdfunding her trip to Oxford. To sell the project to the crowd, she promised to record the adventure as a walking tour so supporters could experience the trip themselves.
The type of crowdfunding project you want to run will be important to your decision on which site you will post. Kickstarter requires that you have some kind of product or service with which you can reward supporters. Other sites like Indiegogo and GoFundMe allow projects for personal interests and you won’t necessarily need to give people anything tangible.
What you crowdfund and how much you’re able to raise is really only limited to your imagination. Probably the wackiest and one of the most famous crowdfunding campaigns is Zack Brown’s campaign to raise money to make potato salad. Note that’s not for a potato salad business, just to make a bowl of potato salad. Seem improbable that he’d find people to support his mission? Zack’s campaign went viral with media exposure and he raised $55,000 from almost 7,000 people.
How to Make Money Crowdfunding a Social Cause
Crowdfunding for social causes and charity organizations is really nothing new, it’s just a different medium. Sites like GoFundMe and Crowdrise allow non-profit fundraising and crowdfunding for personal expenses like medical expenses and bereavement.
The only difference between crowdfunding and the traditional methods open to fundraising for social causes is that crowdfunding opens up a massive audience without the costs of mailers and spam email.
It’s a little outdated but the chart below shows funds raised and growth of the different types of crowdfunding projects over the three years to 2011. While donation-based crowdfunding (social causes) got off to a strong start as the natural evolution of non-profit fundraising, rewards-based crowdfunding has surged and continues to see the fastest growth. Lending-based crowdfunding, more commonly known as peer lending, has grown quickly along with equity crowdfunding.
For a detailed list of the most popular crowdfunding platforms and how to make money crowdfunding your project, check out my Ultimate List of Crowdfunding Platforms on Crowd101.