Over the past two decades, crowdfunding has become a powerhouse for individuals and businesses looking to raise much-needed capital to get their projects off the ground.
Whether to establish a business, support company expansion or raise funds for a cause, project or event, crowdfunding is a valuable strategy that you can make use of should you need extra funding.
But what is crowdfunding, and how does it work?
What is crowdfunding?
In its simplest form, crowdfunding is a way to raise money by inviting a large number of people to make small investments in your project. These small investments are then pooled together to provide the necessary capital you need to get your project started.
How does crowdfunding work?
These investors fund you in the hopes that your project will be successful, and in return, they benefit in some way. Usually, this will relate in some way to the outcome of the project, or it might be a financial reward that exceeds their investment.
Regardless of success or failure, if you raise the fund you need, you’ll be able to attempt your project; and if it does fail, you’re under no obligation to repay your backers.
Crowdfunding In particular can be a great way for small start-ups to get off the ground, thanks to its simplicity and efficiency. It can easily be done online and doesn’t require you to ask specific investors for large sums of money.
In the last year alone, 6,455,080 crowdfunding campaigns were run, a number that’s expected to nearly double in the next four years, and estimates state that the crowdfunding industry will be worth an astounding $300 billion by 2030*.
However, while crowdfunding has quickly become a viable way for businesses to raise necessary project funds, due to its relatively cutting-edge concept, many businesses are apprehensive when it comes to starting their own campaign.
Their main question is often, why choose crowdfunding? Is it not less risky to use more traditional funding methods?
Of course, there are risks associated with crowdfunding, but there are also countless crowdfunding success stories out there that provide its viability on a large scale.
Below are four examples of highly successful crowdfunding stories:
Pioneers of the crowdfunded project, UK rock band Marillion utilized the power of fan support in 1997 when they launched the first-ever successful crowdfunding campaign to finance a North American tour.
Fans of the band were able to raise a grand total of $60,000, allowing the band to carry out their tour. And this was not the last crowdfunded project that the band took part in.
In 2001, following tensions between the band and its label, they asked their fans to pre-order their next album 12 months in advance, effectively financing the project independently as a result of 12,000 signees.
Breaking crowdfunding records, prior to its launch, mobile-first bank Monzo offered investors a 3.33% equity share in the company if the campaign was successful. The campaign itself was held on Crowdcube in 2016 and resulted in a staggering £1 million investment in just 96 seconds!
The bank once again took this approach in late 2018, when current account holders were offered the chance to purchase shares in the business. With a target of £20 million, the crowdfunding experts raised this in just 163 minutes.
True TV enthusiasts will be familiar with the Veronica Mars series. Following many calls for a film adaption of the show by fans, creator Rob Thomas and leading actress Kristen Bell launched a crowdfunding campaign on Kickstarter.
Offering donors incentives if they donated more than $10, in just the first two hours its $2 million goal was reached.
The campaign then continued to break records, successfully achieving the title of fastest Kickstarter project to reach $1 million and $2 million targets, and then named
the campaign with the most backers for a single project (91,585 investors). In total, the film was provided with a $5,702,153 investment.
Following the success of his UK based restaurant, Sticky Walnut, chef and restaurateur Gary Usher wanted to build upon his empire but struggled to find investment from the banking world.
Instead, he turned to Kickstarter, launching a campaign with plans to open a new restaurant named Burnt Truffle. He offered donors free lunches at the restaurant, or private parties for those giving more than £5,000.
891 people donated to this first crowdfunder, raising £103,000 and providing ample funding for the new restaurant to open in 2015.
Usher funded subsequent UK restaurants in a similar way. He opened Hispi with £60,000 pledged, Wreckfish with £200,000, received an amazing £50,000 in less than an hour to open Pinion. Most recently, he opened Kala, which became the fastest-funded restaurant project in the world after it raised £100,000 in just 11 hours.
With those success stories on the table, do you still need to ask the question, why crowdfunding? Take your first step into the world of crowdfunding today by investing in a new project or starting one of your own.
And whether you’re new to this type of funding, or an experienced Crowdfunder already, we’d love to hear your stories. Get in touch with the Moneypenny team on Twitter today. You can also read plenty more articles like this one over on our blog.
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You can find out how our services could help improve your business’s productivity and efficiency by taking advantage of our free trial. You’ll get access to our full service for a whole week with absolutely no ongoing commitment. Call us on 844 364 6623 to get your free trial set up today.