Crowdfunding for startups: you should keep this in mind

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Crowdfunding offers startups the opportunity to achieve a specific financing goal. We have summarized for you what options there are and what you have to consider when crowdfunding.

“Nothing going on without moss”, this saying also applies to founding a start-up. Even the best idea for a new company needs meaningful financing, which can turn out very differently depending on the development stage of the project and the idea. For those who do not rely on a large investor and instead want to have a community of many individual supporters behind them, a crowdfunding approach could be just the thing.

Not all crowdfunding is the same. In addition to the classic variant, there are also crowdinvesting and crowdlending options – a more detailed overview of the three approaches and a list of the most important platforms for them can be found here. The decisive difference: With crowd investing, which is also called equity-based crowdfunding, and crowdlending, the startup ultimately gives the investors back money. This works, for example, through profit sharing or interest-bearing loan repayments. Classic crowdfunding, on the other hand, either runs on a donation basis without consideration or works with remuneration that can be both material and non-material.

Before the start of the campaign, it must be clear which model it should be – after all, there are separate platforms for the different variants. If you want to use the advantages of different crowdfunding approaches at the same time, you should think about combined planning: For example, the first prototype of a product can act as a material reward, the further expansion of the business idea is then financed through crowdlending. If you want to go a completely different way and finance your startup from your own resources, take a look at our guide to bootstrapping.

Once a financing system has been chosen, the next step is planning the campaign and choosing the right platform. The providers differ not only in the type of crowdfunding, but also according to industry or target group addressed: Science Starter focuses on scientific projects, for example, Musicstarter supports aspiring sound artists. Who do I want to inspire with my product and in which business field do I want to establish myself with it? Meticulous processing of these questions helps, on the one hand, when choosing a platform, and on the other hand, the subsequent campaign can be improved even further through precise addressing and a straightforward structure.

In addition to the target group, the usage fees, which have to be factored in in the financial plan, are different for Kickstarter, Seedmatch and Co. A comparison that takes individual needs into account is therefore worthwhile. Important: Some platforms have a so-called “all or nothing” rule. This means: If the financing goal is not achieved, all funds go back to the supporters.

Crowdfunding: The big platform overview for Germany

The type of crowdfunding has been determined, the right platform has been selected – but how high should the financing target actually be and in what period of time should it be achieved? Realistic middle ways are required here. If a campaign is limited in time, it can be difficult to find funding. If the period is set too long, potential donors could migrate to new projects. Campaigns often run for around four to eight weeks.

After the key data have been defined, the content-related campaign planning is due. Videos, product images, texts with an individual address and press work – all of this not only has to be produced, but the display and support of the reactions must also be planned. This way, as little as possible goes wrong during the campaign and nothing stands in the way of retaining the community. It can also be worthwhile not only to communicate in one language, but also to reach international interested parties on appropriate platforms with English content, for example. In addition to well-thought-out and high-quality campaign contributions, transparency of what exactly happens with the money generated can also ensure more trust from potential donors.

The campaign is almost as well planned as the Area 51 defense system and everything is in the starting blocks? Then it can start – and ideally with support from the environment. In order to make the project visible, it is advisable not only to advertise on your own social media channels, but also to ask friends, family and supporters from your personal environment to generate more attention by sharing and discussing the campaign. Potential donors should also be recruited through the press and appearances at events and trade fairs, who ultimately contribute to achieving the financing goal.

With Carefuel founder Vanessa Schäfer, the financing via crowdfunding has already worked, she shares her motivations and experiences here. Apart from the pure success of the campaign, crowdfunding is more than a pure financing tool: Well-executed communication can, for example, make the respective startup better known outside of the investor community, and the experiences from the campaign provide cornerstones for further market research.

For those who do not want to commit themselves to large investors and do not have sufficient funds to start their own business, crowdfunding is a suitable means. In addition, a successful campaign can give clear indications as to whether your own product will be well received in the market. However, the campaign needs to be well thought out and planned. The time frame and the “all or nothing” rule can lead to a rude awakening for founders if there is a large zero at the end.

The author of the article is Elisabeth Urban.

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