Crowdfunding is increasing in popularity amongst the startup world – but what exactly is it? This blog post will look at the background surrounding what crowdfunding is and will be followed by a later post in the coming weeks on what you need to be aware of in terms of bookkeeping, tax and recordkeeping.

What is crowdfunding?

Crowdfunding is where you fund a venture of project by raising small amounts of money from a large group of people.

What are the benefits?

There are three main benefits – (1) you can secure funds to get your business off the ground or help it enter a new phase, (2) you can test whether your business idea is viable before contributing resources to it and (3) you can build a customer base before you even launch.

How can I raise money through crowdfunding?

There are a number of crowdfunding sites which you can use, such as Pozible or OzCrowd.

What do you give in return for crowdfunding?

Generally most crowdfunded projects give something to those who supported them. This can range from the product itself to involvement in naming rights to a different secondary item. You’ll need to think through this, and the factor any of these costs into your crowdfunding budget.

It’s important to have a marketing plan in place before you begin to source financing through crowdfunding . Also, being active on social networks can help raise awareness and get invaluable feedback on your product or service.