Think HBR

Could crowdfunding get your idea to market?

Crowd Funding
Narelle McClelland
The Business Centre
In the past small businesses have been limited to financing their ventures through traditional means such as; personal savings, bank loans, funding from friends and family or grants. But times have changed and now, more and more small businesses are choosing to finance their business ideas through Crowdfunding.
Crowdfunding is the practice of funding a project by raising many small amounts of money from a large number of people, usually online through crowdfunding websites.
A recent successful crowdfunding example is a free-range pig farm in south-west New South Wales. They’ve just raised $18,000 from crowdfunding to build a commercial kitchen and dry curing chamber.
The project hit its financial target within 30 days, it engaged people as the project progressed, and also got people excited about the product. A flow-on effect from this is that there’s already a market for when these products are available.
So how do you get started? The first step is to research crowdfunding websites. There’s a range to choose from including Pozible; which focuses on creative ventures, Jumpstartz for tech startups or Publishizer; for books. Depending on the website that you choose, you need to set a monetary goal and a time frame to reach this goal by and be aware of the fees that the website charges.
The next step is to post your business idea as a campaign onto the crowdfunding website of your choice. You want to make your campaign attractive to investors, so you might include a short video, an introduction to your project, some images to elaborate and a list of rewards per donation. The concept is to create a message that will capture the interest of readers and if people want to support your campaign, they can donate money to help you achieve your goal.
Your list of rewards per donation is there to encourage people to support your campaign.
You can offer incentives based on the amount that they donate and these can be anything, including rewards such as acknowledgement or discounts of future purchase of the product you are developing. Other options include offering equity in your business, effectively 'selling' part of your business to those who contribute funds.
But before you decide to source your finance through crowdfunding, seek advice from your business adviser so that any implications such as tax or business structures can be considered.
Contact The Business Centre on (02) 4925 7700, email or visit