Crowdfunding advice - top 8 tips for small businesses

The crowd has spoken, and it is eager to invest.

Start-ups and SMEs have been incredibly vocal over the past few years about the difficulty of getting their hands on funding. From seed capital to growth capital, getting money from financial institutions has been a struggle for many.

According to the Bank of England, lending to SMEs in the three months leading up to November last year shrunk by a whopping £4bn.

Enter stage left, crowdfunding.

This phenomenon has been gathering pace in Britain for some time now. It is estimated that £120m was dealt out to businesses through crowdfunding in 2011 - and that number is expected to double when the results are out for 2012.

So if you're a start-up looking to get off the ground, your entrepreneurial juices bubbling over as you strive for that initial capital or the fund to take you to the next stage, then appealing to the crowd could be just for you.

Here are our top eight tips for wooing your would-be crowdfunding investors.

 

1. Pick the right site

There are numerous crowdfunding sites active in the UK at the moment. Many have an overlap, but you might well find that some suit your cause better than others. Whether you're a creative company, a social company, finance-based, there will be a site that suits your needs best.

2. Know your target audience

Who do you think will be interested in your product? It can be a massive help to your cause if you can aim your business at a specific niche - especially a passionate one. You could look at geographical targeting, sector targeting, different campaigners, etc.

3. Prepare yourself

You should be prepared to receive a barrage of questioning and get ready to send out many emails. It might save you time to put together a FAQs sheet or even have email templates which you can replicate for each enquiry.

4. Get support first

It will be a much easier sell for you if you can show that you already have support for your business. You could do this by drumming up backing from friends and family to make it look like you are already a success in getting investment.

5. Work out how you will spend the money

You should have a detailed plan of exactly what you are planning to do with the extra capital. People don't want to just throw their money at you without proof that you have a strategy for how their money will best go to use.

6. Be passionate

Hopefully you will be resonating with a crowd that is already passionate about you type of business, product or service and mirroring that will help you to convince them of your dedication. Use images, video and text to get your message across. You should tell your own story as well as that of the business you are pitching. People want to believe in the person behind the business as much as the product.

7. Utilise social media

Not everyone that you are targeting will conveniently stumble their way across to your crowdfunding site if choice. You need to get on all of you social networks and draw people into your campaign. Encourage people to share it with other like-minded people. Cast the net as far as you can.

8. Offer rewards

What will your investors get in return of their gamble - as well as, well, returns? You should offer them more. Discounts, special deal and some credit! Will their names be in the credits of your film? On a plaque on the wall of your office above the pool table? This gives people a real sense of value in putting their cash on the line.

By Gabriella Griffiths of Prelude

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