How to Set Up a Crowdfunding Page

Entrepreneurs have used crowdfunding to generate capital when kickstarting their new business ventures. Successful crowdfunding campaigns can also help small businesses or existing companies to achieve their creative, financial and strategic goals. This article explains how crowdfunding can benefit your business venture and how you can set up a crowdfunding page.

What is Crowdfunding? 

Crowdfunding is a method of fundraising that involves gathering small donations from a large number of people. Investors, or ‘backers’, typically pay small amounts into a single ‘crowdfund’, usually via online platforms. 

What Are the Benefits of Crowdfunding?

If you are beginning a new business venture and need funding, crowdfunding is a great option for the following reasons. 

How to Set Up a Crowdfunding Page

There are five main steps you should follow when setting up a crowdfunding page.  

1. Choose Your Crowdfunding Platform

There are many different online sites that you can use to host a crowdfunding campaign. The first step to creating a crowdfunding page is to select a site that:

• is reputable; and 
• aligns with the goals and nature of your project. 

Different crowdfunding platforms allow different types of crowdfunding. For example, if you want your campaign to be a form of equity crowdfunding, then ensure that the platform you choose caters to this. 

2. Define Your Budget and Funding Goal

It is critical to define your project’s budget clearly. This involves:

• determining how much money you will need to start your new project; and
• ensuring that you set an achievable funding goal. 

Also, you should ensure that you clearly explain to potential backers why you need to obtain this goal and include a breakdown of your budget. This will show that you have thought clearly about the project and will help prospective backers to have confidence in you and your project. 

3. Set an Achievable Timeframe

You should also ensure that you set an achievable timeframe for your crowdfunding campaign. Too short a timeline may mean that the money your campaign generates falls short of your original goal. However, too long a timeframe may indicate a lack of confidence in your idea and may not build a sufficient feeling of urgency around the project for potential backers. 

4. Write a Compelling Pitch

To entice backers, you should also write a captivating campaign story that outlines:

• your business idea;
• how it is unique; and 
• the problem it is going to solve. 

Some platforms allow businesses to include visuals on the crowdfunding platform, such as videos and infographics. This will help potential investors to visualise your project. You should also consider using social media to build a story around your new project. 

5. Engage With Backers

You should also actively communicate with the backers of your crowdfund and provide regular updates about the project. Engaging with your backers can not only give you valuable market insights but also create more excitement around your campaign. 

6. Fulfil Your Promises

When the campaign is complete, make sure that you fulfil the promises that you set out on your crowdfunding page. Additionally, it is worth noting that throughout the crowdfunding campaign, you must also adhere to crowdfunding regulations set by the Financial Conduct Authority (FCA). 

What Are the Disadvantages of Crowdfunding? 

Nevertheless, crowdfunding is not without its challenges. One key drawback is the intense competition on crowdfunding platforms. Additionally, you should note that not every campaign is successful. That is to say, running a crowdfunding campaign does not guarantee that you will achieve the goal set on your crowdfunding page. 

Another key disadvantage is that if you are conducting an equity raise, you are essentially giving away ownership in your business. Depending on what platform you use, funds can be pooled together and invested via one nominee company which holds the shares on behalf of the individual investors. Consequently, you would only need to add one more shareholder to your cap table. Nevertheless, you can end up with a lot of beneficial owners who may have rights in specific scenarios, such as voting rights. 

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Key Takeaways

Crowdfunding provides an exciting opportunity to generate capital that your business can utilise to achieve its business goals. A successful crowdfund demonstrates market demand for your new idea. To run a crowdfunding campaign, you should:

• choose your crowdfunding platform;
• define your budget and funding goal;
• set an achievable timeframe;
• write a compelling pitch;
• engage with your backers; and
• fulfil your promises. 

If you require legal assistance with capital raising, our experienced startup lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.