Startup: the right way to raise capital

According to the forecasts of the World Bank, crowdfunding investments will amount to 93 billion dollars globally by 2025. Crowdfunding platforms are one place where it can be  especially efficient to raise capital — to find people willing to invest in your projects.

Good music brings money

Crowdfunding is a form of collective financing. Crowdfunding websites are meeting places for people raising funds for a variety of projects and the people who are willing to invest in those projects. The latter is not a case of donation, because investors (it could be several people or several hundred people) later, when the project is implemented, usually receive a portion of the profits and may participate in the promotion of the product.

The history of crowdfunding begins 22 years ago: British rock band Marillion appealed to their fans online – and raised enough money in the virtual space for their American tour. The fans got the opportunity to attend concerts for free, and the rockers earned money from the tour.

Everybody was satisfied. The crowdfunding model started with a success. And it has been working successfully up to this day. For example, the capitalization of Indiegogo increased by 50% in just one year due to deposits from around the world; another platform, Kickstarter, has collected $3.2 billion since 2009. It became profitable almost immediately; it gets 5% commission on the raised funds and does not return depositors’ money.

What can you do to make the internet take notice?

To raise money on a crowdfunding platform, it is important to know the following:

1. An important idea for yourself and others

There are enough people in the world who are interested in investing in someone else’s project, if it is at least original, and ideally could be the basis for a future successful company.

A mandatory criterion for future unicorns of business is the combination of uniqueness of the idea with its demand, and even better – with a hype in the focus group. In 2017 British startup Core Collective raised funds to open a Kensington fitness studio, playing on the desire of young perfectionists to be athletic, healthy and positive. The enthusiasm for sports among millennials and older generations has brought thousands of people in the English-speaking communities from London to Singapore to sports classes with individually selected programs, which is ideal for all people. The startup has raised 3 million pounds in a few weeks, has changed the standards of the world fitness and wellness industry: now these standards are implemented in almost all clubs.

2. A project with “social significance”

At the present moment people participating in crowdfunding are increasingly starting to think like this: how is the project I’m investing in socially significant? The moral is: if you offer a project on a crowdfunding platform – tell more about how it will benefit society. It’s a good idea to make a documentary film relating to a socially significant or environmental topic. 

3. If the money doesn’t come immediately – take the next step 

Engage more friends, relatives and acquaintances in the realization of your idea. In other words, form a circle of people who will support you – if not with money, at least they will help bring your idea to a greater number of internet users.

The project on crowdfunding begins with a competent presentation – with high-quality content and exciting visuals (including a video presentation for social networks). The people you reach can help promote the project: to share contacts, find a new market and give recommendations to other real investors. And if the startup does not immediately receive the support you expect, then in no case should you give up, but analyze where you made a mistake – take a new step – and just go ahead.

In general, crowdfunding is a “success story” involving a large number of people. And with each new idea, their number increases – like circles in the water from a thrown stone.

It is important to realize one more thing. On crowdfunding platforms, the number of ideas with good commercial potential is growing annually as the process of creating startups and the market are improving.

Where to get help  

According to World Bank forecasts, by 2025, crowdfunding investments will amount to 93 billion dollars. Likewise, the US dollar and fiat currencies in general are not the only currency on the scene: online crowdfunding models are quickly adapting to the cryptocurrency world.

On the Acorn Collective website, they help startups find funding. There are all the tools, statistics  and users with experience of supporting new initiatives. Thanks to the ICO mechanism and the use of the Ethereum blockchain, Acorn Collective makes it possible not to pay the 3-5% transaction fees and 5% platform commission, as is the case on other US websites like Kickstarter. With the help of the blockchain, smart contracts and cryptocurrencies, startups can receive money almost instantly, bypassing intermediaries.

The company Komodo introduced the world’s first application for decentralized ICO Utrum. The latter is a fundraising method for a blockchain project using atomic swap technology, which eliminates the need for escrow, intermediary tokens and any outside services, including centralized exchangers. Atomic swap is the operation of exchanging one digital asset – cryptocurrency – for another. The transaction is instantaneous, and there is no need to involve a third party in this process.

At Komodo, fundraising is faster, cheaper and safer than through conventional models. The program is open source, any developer or entrepreneur can get access to free tools for organizing blockchain-crowdfunding.

Another platform is Boomstarter.Network. Since 2012, it has helped thousands of entrepreneurs to raise funds in the form of a fee for pre-orders based on crowdfunding

The Thai Stock Exchange launched the LiVE crowdfunding blockchain platform in 2018: from there, startups and small and medium-sized businesses get direct access to venture capital funds and institutional investors.

There are numerous examples of how crowdfunding platforms find the funds to implement their ideas. So, even before the boom on the smartwatch in 2013, the Pebble wrist gadget project was launched. It collected more than $10 million from 70,000 participating contributors on Kickstarter. And the Indiegogo platform attracts many people by the fact that if the project is not successful in meeting its target, the investor can recoup up to 90% of their funds.

Everyone becomes a part of the “success story”

The number of ideas with good commercial potential is growing annually – and in general the crowdfunding market is improving qualitatively. More and more people are enticed by the very thought that in a well-functioning crowdfunding model, each investor becomes part of the “success story” of a product — and receives a portion of the company’s shares. Here we are not talking about five acquaintances who have chipped in 50-100 thousand euros, but about 60-80 people who transfer money for a project that is potentially interesting in a particular area.

The Fundwise system is a successful example. Through Fundwise, about 15 companies have been financed, with the total sum amounting to 1.3 million euros. Fundwise allows everyone who has invested through them to get a part of the business (of course, along with all the risks and possible profits).

A huge number of people in the crowdfunding system are jointly able to help a particular enterprise: to share contacts, find a new market, even open one and give recommendations to the “right person”. But the search for capital is a serious challenge at the very beginning – it is not that easy! But it is certainly worth it. Why not give it a try?

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