Crowdfunding seems to be increasing in popularity and more and more businesses are using this route to source much needed funds to start up or grow their small business.
What is crowdfunding?
Crowdfunding enables businesses and projects to raise money by inviting people to pledge or invest small amounts, usually online. Using a crowdfunding website a business can invite/advertise to potential investors who then choose whether to pledge money, how much, and the return (if any) they expect. All this is done without the use of traditional banks.
Local Bournemouth based small business el RHEY have just completed a crowdfunding campaign so I asked them a few key questions.
Why did you decide to use crowdfunding?
ColourMe Wellies have been in development for over two years. From initial concept in 2012 el RHEY have been on a journey of challenges. After hundreds designs and prototypes from across the world, we finally have a product we are proud of and one we want to share with little artists everywhere.
We have now reached the point of ordering our stock however we need your help. Our in-house capabilities may include cutting edge fashion design but they do not include web development. We are raising funds to improve our website and develop an e-commerce platform that will allow our customer base and brand to grow.
Our target is to raise £5000 to professionally develop an e-commerce shop that matches the innovation of our children’s fashion line. Should we exceed this target the additional funds will be invested in future product development and expanding the el RHEY line.
What research did you do in terms of crowdfunding?
We analysed several different campaigns on crowdfunding platforms that had been successful in raising the funding they had requested. Many aspect was researched, from copy, approach, type of rewards, multimedia content in order to determine what attracted, convinced and above all, made pledgers believe in the project.
Apart from that, we also researched on blogs, online crowdfunding communities to look at what approaches worked for other and which ones did not.
What are the pros?
Firstly, we had lots of fun planning and developing our campaign. We also managed to develop some great content, copy, video and overall, the crowdfunding campaign generated some amazing PR and brand awareness!
I think this is a key point here that crowdfunded projects get a lot of attention via social media which helps to develop brand awareness and gather a customer following. Customers also like businesses they can feel part of and have a relationship with – crowdfunding makes this possible.
What are the cons?
Since we didnt reach our target funding, our pledgers are going to have to wait slightly longer for their reward (Only very slightly though) Since we only gave our campaign 2 weeks, the time constraint played a big role in ColourMe Wellies not reaching the funding target. We also now have to find alternative funding routes for launching our e-commerce platform!
Overall, even though we didnt reach our target funding, we have received some very valuable feedback, brand recognition, PR and interest in our ColourMe Wellies! Am amazing experience all together!
Using crowdfunding sites can also mean that you put an idea out into the open that ultimately you can’t afford to fund – which can open your business up to copy cats. You also hold yourself accountable to actually taking action!
For further information PremierLine Direct have helped produce a guide for SME’s – Everything SME’s need to know about crowdfunding. If you are considering using this form of funding for your small business then it is definitely worth a read.
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