Tuesday, 05 April 2022 15:16

Funding your social enterprise by your community. How does crowdfunding work?

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Of course, investments will be needed to start or develop a social enterprise. In addition to the traditional ways of raising funds, you can also pay attention to crowdfunding. What it is?

Crowdfunding is the way of funding a project or venture by raising money from a large number of people who each contribute a relatively small amount.

Crowdfunding platforms use the internet and social networks to bring closer funders and creators who seek funding. A crowdfunding platform offers an overview of the projects that pitch for funding. Apart from each company’s pitch or business idea, funders can find various other information. For example, the fundraising goal that the business has set, how far it is from achieving it, or how many have supported the project.

Investors interested in a specific project have different options in return for their money. They can donate their money simply because they believe in the business’s mission or invest in return for a percentage of shares or a reward. For this reason, crowdsourcing is an excellent way for social entrepreneurs to receive funding as the social goals of social enterprises are unattractive to traditional investors because it contradicts their profit maximization principles.

One of the most popular crowdfunding platforms is Indiegogo.

Indiegogo users are usually creating campaigns for tech innovations, creative works, and community projects. The crowdfunding platform works similarly to Kickstarter, except it doesn’t have an exclusively all-or-nothing fundraising model.

Users choose between two options: fixed and flexible funding. Fixed is best for fundraisers where your project needs a certain amount of money, while flexible is good for campaigns where you’ll benefit from any funding. With flexible funding, you will get your funds whether or not you meet your goal; with fixed funding, all funds are returned to your donors if you do not meet the campaign goal.

Of course, you are not limited only by this option. Other popular platforms are Kickstarter, Patreon, GoFundMe, and CircleUp. You can make the best choice for you based on your target audience, the scale of your project, your business model and other details.

Learn from other examples! Forbes published an interesting list of five successful crowdfunding campaigns and what you can learn from them. It includes such startups as ChessUp, Sentien Audio, Eye Mask by Ostrichpillow, Retio and The First 3D Luminous Colored Wooden World Map. You can read about those campaigns more.

We hope that now you have a better understanding of crowdfunding and it will be a useful tool for your social enterprise!