One of the newest ways of raising funds for your business, or to bring an idea you have into the business world, is through crowdfunding. Although it’s a very exciting and promising method for raising funds, crowdfunding has its own set of challenges and issues which every budding entrepreneur should be aware of.

Winning the trust of donors

This can be one of the hardest challenges involved with crowdfunding, because you’re asking donors to have faith in you even though you have no prior history of business success. In order to attract potential investors, you have to establish credibility, so that people will be willing to commit funds to your project.

Choosing the right crowdfunding platform

There are a number of successful crowdfunding platforms on the Internet, as well as some which are questionable in terms of their appeal to investors. While platforms such as IndieGogo and Kickstarter routinely earn high marks for credibility, there are other platforms which may be just as useful, and which you should investigate.

Achieving your targets

It’s very important that you establish realistic targets and deadlines for your crowdfunding project. While it might seem appealing for you to adopt a very aggressive target and/or deadline, in the end, investors will be disenchanted when you fail to meet those aggressive targets.

Generating interest before your campaign

It’s critical that you generate interest in your crowdfunding campaign before you ever launch it, because otherwise you’ll be spending valuable time after the launch trying to create interest. This could cause you to miss your target or your deadline, and lose credibility with all your investors. A good rule of thumb is to start generating interest in your campaign about five months before you actually launch it.

Rewarding your investors

Make sure that you have a clear understanding with all of your investors exactly what their reward will be for backing you. This may be a share of your company, or it may be a certain amount of products earmarked specifically for them, but whatever it is make sure both you and your investors have a solid understanding of how investors will be rewarded.

The role of crowdfunding

While crowdfunding certainly has a role in modern day fundraising, it’s not really suitable for all business fundraising efforts. If you need to raise capital much more quickly than a long-running crowdfunding campaign, you should contact JNI Lending to discuss some options for your fundraising project.