Crowdfunding – what exactly is it?

Crowdfunding – what exactly is it?

I’m sure many of you will have heard of the term ‘crowdfunding’ – but how many of you know how it actually works?

Well, quite simply, crowdfunding is a way for a business, an individual, a charity, or some other project to raise money without the need to go to a bank, or other normal ’funding’ channels. It is in essence raising money from people you may, or may not know, in which case you are never likely to meet many of them – in essence you are raising money from ‘The Crowd’.

Many businesses have turned to this way of raising the capital they need to expand and grow, and to gain a foothold in the marketplace. It became more established following the last recession, as traditional bank funding increasingly dried up. It is fair to say that for every success story there will be many failures as well.

Good causes

However, perhaps the most positive power of crowdfunding is in relation to good causes, as it gives them access to raising money that they may never have had before. It might be that there is a need to raise money to repair the roof on a local church, to buy equipment for a local youth group, to help fund a social club that helps older people or one of many, other worthy causes.

So does it work?

Well the simple answer to that is yes! Perhaps the most well-known crowdfunding platform is Just Giving and I’m sure that many people will have heard of this. Last year the site passed the $4bn milestone of funds raised for good causes around the world since the crowdfunding platform was created back in 2001 – that’s a heck of a lot of money!

How do I go about setting it up?

Well, if you have internet access then it is quite easy – you go and create your own crowdfunding page on the Just Giving website. You will need to give details of what it is you are wanting to raise money for and why and what your fundraising target is.

It’s important to set a target of the amount of money you want to raise as evidence shows that those who do, on average, raise more for their cause than those that don’t. There are plenty of examples and loads of advice to help you along the way on their website.

Once you have built your fundraising page you need to support and promote it – tell all your friends and family, encourage them to donate online to share it amongst their online connections. Make contact with your local press and media and see if they will feature your campaign as well. The more ‘noise’ you can make around your site and project then the more successful your fundraising is likely to be.

Set a time limit

Most crowdfunding pages will run for between 30 and 120 days and putting on a time limit is really important, because at the launch of your campaign it will create ‘urgency’ and momentum.

Statistics show that most crowdfunding pages raise the bulk of their money at the start and the end of their campaigns – people either want to give them a good start, or they want them to finish on a high.

One of the great things about crowdfunding is that you, and everybody else can see how you are progressing towards your target – this can be quite exciting as you watch the money raised grow and grow – in fact this can be very rewarding. And once you have reached your target you don’t have to stop – many crowdfunding pages raise much more than they anticipated. You can also track the donations which make up the total sum of money raised, and you’ll be surprised how many small donations are pledged and how quickly they can add up!

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