Three pitfalls to sidestep when taking the crowdfunding plunge

Crowdfunding has become a viable means of alternative financing in the twenty-first century.

It seems like everyone wants to get in on the action as a defiant act of breaking away from the traditional financing routes of banks and loans. It’s a busy marketplace with many entrepreneurs, companies, and individuals vying for investment. You can’t simply upload a business plan and hope that your forecasting does the talking. You need to cut your teeth in the crowdfunding sphere and ensure that your pitch is watertight, shows off the rewards for any potential investor and stands head and shoulders above your rivals. Take a look at these three pitfalls to avoid when dipping your toe in the crowdfunding water.

Running before you can walk

If you have an idea that you are certain you can turn into a money-making business, you need to demonstrate this to your potential investors. Make sure your figures add up and match the level of funding needed in your business plan to the amount you have set as your crowdfunding goal. Don’t state in your plan that you need $10,000 to see your venture launch successfully and then set triple this amount as your fundraising target. At worst it can make you look shifty and a bit of a chancer. This doesn’t fill investors with confidence, and they will swiftly move on to the next venture.

If you find that you do require more funding than would look feasible in one lump sum, break your crowdfunding into phases. This way investors will see that you’ve clearly thought through your business plan.

Not getting the traffic

It’s lazy to assume that just because you have launched a crowdfunding campaign that the investors will swarm to your pitch. You need to utilize social media, your website, blogs and third parties to publicize your campaign. In the same way as using SEO to get your website high up the search rankings on Google, you need to drive traffic to your campaign to see it reach more pairs of eyes that could potentially invest in your idea.

Trying to achieve funding can be incredibly stressful. If you are still working fulltime and finding the financial pressures are becoming unbearable, seek out your EAP to give you impartial advice and help you through any difficulties you may be having.

Get a leg up

Any crowdfunding campaign that has been active on a platform for a week but remains pledge-less is unlikely to be successful. It’s cheating a little bit but launch your campaign with a legion of family and friends who will quickly invest in your idea. This will make your business proposal look strong, and it will appear to other investors that fellow subscribers to the platform would like to see your idea validated. If you’re able to secure funding quickly, you will encourage other investors to jump on the bandwagon. Generating an online buzz is the essence of intelligent marketing.

Crowdfunding is an exceptional way of sourcing finance for your business idea. It is a growing investment platform that, if you can avoid the pitfalls that go along with it, can be utilized effectively.