A Guide to Crowdfunding in Australia
The crowdfunding model has been helping new companies and organisations turn their ideas into reality since the 2,000s, but it’s only more recently that it has gained traction in Australia. This is certainly good news if you have a big project you’ve been wanting to put out into the world but haven’t had the resources to do so just yet. Crowdfunding might be the key to your success. Here, we’ve put together a brief guide to what’s out there for you to explore.
What Is Crowdfunding?
You can think of crowdfunding as a bridge that connects your genius idea to the people who love your genius idea.
As its name suggests, crowdfunding is a way of gathering funding from a crowd. It works by presenting an idea to an audience (usually through the internet) and gaining supporters who will back you as you push your idea through to fruition. The interested parties can help you raise capital for your plan in different ways. They can purchase company shares, pre-purchase your product, donate or even lend you money. This bypasses the more traditional funding sources like banks – you’re taking your idea directly to your audience.
Different Crowdfunding Platforms
In Australia there are many websites that serve as platforms for crowdfunding. These websites focus on certain methods to help raise funds for your idea. Here are the different types of crowdfunding websites:
- 1. Reward-based platforms
Reward-based platforms are where you give rewards to the people who are helping you fund your business idea. Rewards are usually in the form of exclusive products or services from the company running the campaign. This is a very popular type of platform because it is aimed at consumers. Funders get great incentives, and the campaign holders do not have to sell their shares in their companies.
If you are developing a new consumer product this type of platform enables you to fund your project through your customers advanced purchases. If you have an existing business and want to launch a new product this is an effective way of funding. Instead of asking for funding from a bank your existing customers are helping you launch your next product.
Here are a few rewards-based platforms that you can visit:
- ReadyFundGo – an Australian-based platform for business start-ups, scale-ups, innovators, researchers and community projects that offers live support and campaign management services to help you with your campaign
- Kickstarter– an American-based platform that’s been funding some of the biggest projects since 2009
- Indiegogo– an international platform and one of the first websites to introduce crowdfunding
- Pozible– an Australian-based platform that started focuusing on arts and music
- 2. Equity-based platforms
Equity-based platforms are where you offer shares of company stocks to investors. This means that when your idea is up and running, the investors that helped you out will own part of your company. The investors on this type of platform aim to receive financial gain in exchange for funding your business.
Here are some Australia-based equity crowdfunding websites that you can visit:
- 3. Debt-based platforms
Debt-based platforms are where you can borrow money pooled from a crowd with the promise of returning the money with interest. It’s best explained in terms of borrowers and lenders. Lenders place money that they are willing to lend and the interest that they want to receive. A borrower (company) would place the amount that they need and offer assets to guarantee the payment of the loan. The website would then decide the terms of the loan.
It’s quite like traditional financing where you borrow money from a bank. The difference is that the amount borrowed is split among a number of people who are already willing to lend the money. This means that you won’t have to wait as long for approval.
Here are some debt-based crowdfunding websites that are worth checking out:
- SocietyOne– an Australian-based site where you can acquire low-rate personal loans
- Prospa– an Australian-based crowdfunding site that primarily caters to small businesses
- RateSetter– a peer-to-peer lending company that can offer small personal loans to huge business loans with reasonable interest rates
- 4. Donation-based platforms
Donation-based platforms are where you typically start not-for-profit crowdfunding campaigns rather than business campaigns. Funders will not receive any financial value from investing in these campaigns. Instead, they are allowed the opportunity to financially support ideas that they truly care about. This platform is used to raise funds for charities, disaster relief, medical assistance, environmental initiatives and other non-profit endeavours.
- StartSomeGoodis a great website where you can fund projects that help make the world a better place. Projects here range from saving critically endangered plant species to rebuilding a village after an earthquake.
If you have a brilliant new product in mind and you’re still looking for an opportunity to enter the world of crowdfunding, book a crowdfunding consultation with ReadyFundGo. We offer crowdfunding campaign management for rewards- and equity-based campaigns. Turn your idea into reality and book your consultation today.