Crowdfunding - from people to people

The bases of crowdfunding: what it is, how can it be used and which steps should be followed when developing a crowdfunding campaign.
Loredana Elena Musat
June 2, 2015

Kristine Pontoppidan, a crowdfunding ninja who works at Erhvervsstyrelsen, has given great insight into the world of crowdfunding during a workshop organized by Startvækst Aarhus.

Crowdfunding is Growing in Size

Crowdfunding, a practice growing bigger and bigger, is a method of achieving funding for a project with the help of a large number of people. There are 4 types of crowdfunding:

  • Donation based crowdfunding, where people donate money for your cause without expecting anything in return, a practice often used by NGOs;
  • Reward based crowdfunding, where people give money for your project or venture in exchange for a reward established by the ones searching for funding;
  • Lending based crowdfunding, where one or several established companies lend a startup the necessary funding;
  • Equity based crowdfunding, where people support a project by providing funding in the form of equity.

The reward based crowdfunding is the most encountered method and it is very accessible to startups. There are several platforms where a reward based crowdfunding campaign can be run, such as FundedByMe, Booomerang, Indiegogo or Kickstarter. For companies targeting international campaigns, wider-oriented platforms work better. As Kristine Pontoppidan said, “There are only 5 million people in Denmark; you need to think internationally from the start”.

The 4 Steps of the Crowdfunding Campaign

A tentative model for running a campaign on one of the larger platforms, like Kickstarter, can be divided into 3 main steps:

1. Pre-campaign

In this part, the key words are: preparation, planning, setting up and promotion. It is the step where the prototype is prepared, a timeline is set and a good understanding of how the product or service of your startup solves a problem leading therefore, to people being willing to buy it. This is also where the fun part comes: creating the video which promotes your product or service. It should be relevant, eye-catching and why not, a bit goofy if it helps illustrate a point. For some inspiration, you can find a great video here, of a campaign which has managed to achieve its goal.

2. Campaign

This is where the launching occurs and the crowd power makes its presence felt. It’s also important to remember that once your campaign is out there, you should keep your crowd involved, give it updates and engage with backers constantly. This is the only way you will reach your goal.

3. Post-campaign

When it’s all set and you managed to achieve your funding goals, more work is coming up. Now is the time to test and adapt your product or service and once you’ve done that, you can move to actual production and shipping. Remember to continue to be transparent and communicate efficiently with your team.

Got it? Ready. Set. Kickstart.

This article was written based on the event: Crowdfunding for Startups