Crowdfunding Your Business Venture
Do you have an idea for a startup or a side-hustle ? Do you have an existing business that you are looking to scale ?
Crowdfunding could be for you …..
Everyone has heard about or used crowdfunding for charitable or community projects but not everyone has thought of it as a means to get their start-up idea off the ground or to grow their business.
After all this time being at home with the COVID 19 lockdowns you might have a brilliant idea for a business but do not know how to start.
Many people get stuck on the first step and never make it to trying our their idea. They spend months and years just thinking about it.
Crowdfunding is a great way test your idea out before you invest too much time or money. If it does not work you can then move on to the next idea and not be left with that sinking feeling when you see someone else has started with your idea and you are left wishing you had the courage to have a go.
What exactly is crowdfunding and how can it help?
Crowdfunding is simply what it says on the tin! It is the fundingof a project or venture by a large number of people – “the crowd”.
There are broadly four different types of crowdfunding – donation basedtypically for charitable causes, debt-basedfor businesses with a steady cashflow where the borrower pays interest to those who lend funds, equity-basedwhereby individuals give away shares in their business in return for capital investment and reward-basedwhere the entrepreneur provides a product or service in return for funding.
It is the latter type that is most commonly used for early stage businesses and most scale-ups. Often “the crowd” pre-purchases a product from you to help you with your cash-flow at the start of a new venture.
We tend to find that examples are an ideal way to illustrate the concept and at ReadyFundGo we have some great examples of how female entrepreneurs have used crowdfunding successfully.
We have picked Meg Solly, Lindsay Davies and Kimberley Williams.
Let’s start with how Meg Solly used crowdfunding.
Meg Solly: She Skills
Meg Solly, is the She Skills CEO and founder, who started with a mere idea. She wanted to teach women technical skills and tasks stereotypically executed by men such as wood work and car mechanics.
Meg had a great business plan, she knew which courses she wanted to run, had set-out what she would cover in her courses and then found her ideal premises.
However, at this point she was going to have to pay out several thousand dollars of her hard-earned savings to secure the lease and she was not completely sure that everyone else would love her idea as much as she did and want to join her classes.
So Meg very cleverly launched a crowdfunding campaign pre-selling vouchers for her courses in her local community. The vouchers were being sold for around $100 and after contacting her networks and spreading the word locally she soon hit her campaign target of $5,000.
This was enough to get Meg started. She paid for the premises and delivered the classes to those people who had purchased the rewards and she was off and running.
Since then she moved to a larger workshop and hired three-part time staff members.
For Meg’s start-up crowdfunding was much better than borrowing funds from a bank. She had no interest to pay and she was targeting her customers to prove there was demand before she launched.
Lindsay Davies: UrbanXtreme
Lindsay Davies, the founder of UrbanXtreme, had a big dream. She wanted to open the first indoor snow centre in Brisbane !
Lindsay worked tirelessly and managed to raise a significant sum from angel investors to acquire and kit out a large warehouse.
Once she had signed the lease for her premises Lindsay knew that it would take 6-8 months of kitting out the space and refurbishments before she would be able to open her doors to paying customers. Lindsay also knew that most businesses fail due to lack of cashflow.
Lindsay started a crowdfunding projectwith ReadyFundGo to pre-sell discounted ski and snowboard passes and lessons to her local community who were so excited about her new venture.
The local community received a discount through purchasing in advance and Lindsay had close to $40,000 of funds coming in before she opened. It was a double whammy for Lindsay – as well as having help with her cashflow when she opened she already had customers queuing up to come through the door rather than having to wait another 3 months for people to find out about UrbanXtreme.
Kimberly Williams : The Yoga Tent Studio
Kim had been teaching yoga for a number of years and had built a good business with loyal clients who loved her classes.
She taught her yoga in her beloved yoga tent come marquee which contributed to the atmosphere of the classes.
Earlier this year Kim was understandably distraught when after making small patch repairs to her tent over a number of years she was finally told that the tent could no longer be repaired, and she would need to purchase a new one. Kim did not have the $3,500 needed for a new tent.
Kim started her ReadyFundGo campaign and offered special passes for classes, an online video class and tickets for the opening party in her new studio.
She raised the money required from a combination of new and existing customers and we are pleased to report her new studio tent is up and classes are running.
More than Raising Funds
We hope that these examples give you some good ideas of how you may be able to use reward-based crowdfunding to get your idea off the ground or help scale your business.
Reward-based crowdfunding tends to work best for B2C businesses (Business to Consumer) and is often about more than just raising funds.
It does enables you to raise interest-free funds without diluting your own shareholding but also gives you the opportunity to test an idea in the market place and gain your business a following or customer base who will hopefully stay with you on your journey as your business grows and become your greatest advocates.