Is Crowdfunding Right for Your Business?

Crowdfunding is a popular way to raise money for businesses, but it’s not right for everyone. Before you decide to launch a crowdfunding campaign, ask yourself these important questions.

What is crowdfunding?

Crowdfunding is the use of small amounts of capital from a large number of investors to finance a new business venture. Crowdfunding is a way to raise money for your business without going through the traditional channels of banks or venture capitalists.

There are three main types of crowdfunding: equity-based, donations and reward-based. Equity-based crowdfunding allows investors to own a piece of your company in exchange for their investment. Reward-based crowdfunding allows you to offer products or services as rewards to investors in exchange for their investment. Donations enables people to back a cause that they believe in.

Crowdfunding can be a great way to raise money for your business, but it’s not right for everyone. Before you decide to launch a crowdfunding campaign, it’s important to understand the risks and rewards associated with this type of financing.

What are the different types of crowdfunding?

Broadly speaking, there are three types of crowdfunding: reward-based, donation-based, and equity-based. Here’s a quick rundown of each type to help you figure out which one is right for your business:

Reward-based crowdfunding involves offering rewards to people who give money to your campaign. For example, you might offer donors a free product or exclusive access to your company’s beta launch. Donation-based crowdfunding is just what it sounds like: people donate money to your campaign with no expectation of anything in return. This type of crowdfunding is often used by charities and non-profit organizations.

Equity-based crowdfunding is a bit more complicated. In this type of crowdfunding, people who invest in your campaign receive equity in your company. This means that they are essentially buying a share of your business and will receive a portion of the profits (if any) when the business is sold or goes public. Equity-based crowdfunding opens up access to investing in businesses, that historically only the most wealthy could invest in.

So which type of crowdfunding is right for you? It depends on your business goals and the amount of money you’re trying to raise. If you’re looking for quick capital with no strings attached, donation-based crowdfunding might be the way to go. However, if you’re looking for long-term investors who will help you grow your business, equity-based crowdfunding could be a better option.

Benefits of crowdfunding

Crowdfunding is a way of raising money from a large number of people, typically via the internet. It’s often used by startups and small businesses as a way to raise funds without going down the traditional route of borrowing from a bank or pitching to Venture Capitalists.

There are several benefits to crowdfunding, including:

You can test-drive your business idea. If people are willing to back your project, it’s a good indication that your business idea has potential.

You can build a community of ambassadors for your brand. The people who back your project are essentially people who believe in you and what you’re doing. This can be invaluable when it comes to marketing and promoting your business further down the line.

You can get feedback on your business idea. As well as financial backing, many crowdfunding platforms also offer the opportunity to get feedback from backers on your business idea. This can be useful in terms of refining and improving your offering before you launch it properly.

Crowdfunding can be a great way to get your business off the ground, but it’s not right for everyone. You need to have a clear plan in place and be realistic about how much money you’re likely to raise. You also need to be prepared to put in the hard work to promote your campaign and make sure it stands out from the crowd.

Want to learn more? We’re hosting a webinar on Tuesday October 4th 9am PT 5pm BST. You can register here.

Alternatively you can follow this free course to see if crowdfunding is right for you and to help you understand the process.

The Five Different Types of Crowdfunding

Crowdfunding is raising funds from small amounts from multiple backers. It’s been around for centuries, even the plinth for the statue of Liberty was crowdfunded. With the adoption of computers and new legislation it has become mainstream. But did you know there are at least five different types of crowdfunding?

Donations Crowdfunding

When a group of people get behind a cause or for a purpose, think GoFundMe or Fundrazr. Charities and not for profits are finding donations crowdfunding an effective way to engage and raise funds from a wider base of donors.

Rewards Crowdfunding

Backers get a tangible or intangible reward, think Indiegogo or Kickstarter. Great if you want to get the funds to pay to manufacture a product from a prototype, for market research and for backers to get early access at a great price.

Peer to Peer Lending

A group of backers invest in a company or group of companies looking to get their money back plus a return. It allows people to invest in early stage companies and reduce the risk by diversifying over multiple companies. For companies, this is access to capital, without giving up equity (ownership). Great if you know you will be making revenue soon.


If you watch Dragon’s Den or Shark Tank then you’ve probably heard of royalties. Backers invest in a company and receive a set percentage for each sale of the item until the amount is repaid plus an agreed amount.

Equity Crowdfunding

Backers invest in a company and get equity in return, think Crowdcube or Republic. Companies not only gain access to capital but a group of advocates who believe in the company too, and can often be more patient than other traditional investors.

Which one is right for your organisation? Join the introduction to crowdfunding to decide whether crowdfunding is right for you.