Crowdfunding has really grown in popularity over the years as an innovative way to help people find the money they need – from hundreds of pounds to millions of pounds! – to start up and grow their business.
Before we talk about the different types of crowdfunding options though, it’s useful for you as a woman business-owner to be aware that other women really like crowdfunding. It’s a simple and effective way for them to help other women in business, especially if you are developing a product that they as women really understand.
Research shows that women are more likely to get funded than men through crowdfunding because women are considered more trustworthy – a positive side to gender bias for a change!
Women-led campaigns are 32% more successful than those that are male-led and the average donation/pledge is 5% more. This is partly because at very early stages of a start-up authenticity, trust and passion are more important than competence in business (your business skills will build over time, don’t worry), and crowdfunding allows you to let these wonderful values shine through. So, if you have struggled to get the money you need to start your business, crowdfunding could be a good route to explore.
Crowdfunding works a bit like what a Scottish granny used to say: “Mony a mickle maks a muckle!” Lots of small amounts of money from a large number of different people add up to quite a lot. For example, myself and my co-founders Gaynor and Carolyn ran a crowdfunding campaign with RBS Back Her Business (a woman-only programme) in 2019 to raise money to start our new company Immaculate Drinks. In five weeks we raised over £13,000 from 151 supporters, with donations ranging from £10 to £1000, and we used that money to fund the development of our first product.
And co-founders Tynah Matembe and Helene Rodger of fintech company MoneyMatiX raised £10,449 from 131 supporters in 34 days to develop their KuzaKash App to help bring parents and children together to talk and learn about money.
There are lots of different types of crowdfunding, but they all work in broadly the same way. You create a fundraising campaign with a target amount to raise on an online platform and this platform enables you to showcase your idea to people over a set period of time (e.g. a couple of weeks or a couple of months).
During this time people invest or donate money and if you reach your target of say £10,000 within the set timescale, that money is then given to you (after some fees are deducted) for you to develop your business. In return for the money you either give a reward to people (rewards-based crowdfunding) or people have an equity stake in your company i.e. they are a ‘shareholder’ (equity-based crowdfunding) or you have a loan to repay (peer-to-peer crowdfunding).
Depending on the platform used, if you don’t meet your fundraiser target you might not get any of the money, so it’s important to think carefully about setting an achievable target and choose the platform that’s right for you. See here for more information on the different types of crowdfunding platforms.
Other benefits of crowdfunding include being able test your idea and get customer feedback before you launch, creating a group of supportive customers that give you a ready-made community you can sell to and generally making your product and company much more visible to a wide group of people outside of your friends, family and colleagues. With Immaculate Drinks, we had so many supporters saying they would like to stock our product when ready, lots of publicity in newspapers, and even our first order! And all for free…although it does takes quite a bit of hard work and you do need to be organised. We’ll tell you a little bit more about that later on.
Crowdfunding is not just for businesses developing new products – you can crowdfund for service companies too. And it’s not just for new companies – you can use it to grow your established business and can do as many crowdfunding campaigns as you need to over time.
At Immaculate Drinks we benefited so much from taking part in a crowdfunding campaign – and not just from the money we raised! Even the process of pulling together the information for the campaign was helpful. At the start, much of it existed in our heads and on scraps of paper and various emails and documents, so the process itself forced us to take the time and pull it all together into a clear product and campaign that made sense to us and others. It may take a lot of time to do all that, but it’s time well spent.
Raising money from other people through a campaign was a real confidence-booster too – that endorsement of us and our product helped build our self-belief and spurred us on. The emotional support was just as valuable as the financial support.
We didn’t get it all right though with the campaign – there were certainly a few bloopers along the way! – so here’s some tips based on our experience of crowdfunding:
- Take time to look through other sites and then through other campaigns on your chosen site to see what has worked for others and adapt for your idea.
- Give yourself plenty time to plan your campaign before you officially launch and, in particular, build up a contact list of key people you want to contact early on to get you up and running quickly with donations – we didn’t do that and later wished we had!
- Get some really good images of your team and your product and set up your social media channels before you launch your campaign.
- Make sure you let your story shine through, people are interested in you as people and how they can help make your dreams come true. Remember, trust, authenticity and passion are the key to building your community of supporters.
- Make sure you allocate time for regular campaign updates – we got lovely feedback from someone to say that she had really liked the tone, style and volume of our updates, in contrast to some other projects she had funded. Your supporters like to feel involved in your journey and will become your long term advocates.
- It’s not for the faint-hearted – you really need to work at it – so manage your time and your expectations carefully.
We genuinely believe that any woman who wants to start her own business, large or small, can do it. There is no better feeling in business than being in charge of your own destiny…apart from the time when your first hold in your hands a product that you yourself have conceived and developed! Maybe crowdfunding will help you experience those wonderful feelings?