Crowdfunding has become popular in the last few years. It works by raising capital from the general public via specialized websites. You launch a campaign for a set time, outlining your project, and setting a target for how much you want to raise.
There are dozens of crowdfunding sites out there. Some of them work with artists, others with business enterprises or personal projects. Spend time reviewing the platforms and looking at the current campaigns and success stories before deciding which one is best for you.
Lisa Grassi Blais and Jake Rupert, from Ottawa, Canada, set up an inn and tour company in Italy, Amazing Abruzzo Tours, with the help of a crowdfunding campaign on Indiegogo.
“We had a budget for our project, but some of the quotes that came in were higher than we anticipated,” explains Jake. Reluctant to get a loan or seek an investor, they turned to crowdsourcing.
“At first I couldn’t understand why people would give money to someone who is not poor and starting a business,” says Jake. “Then, looking at the campaigns on Indiegogo, I saw that those were sales rather than anything else.”
Lisa and Jake treated the crowdfunding campaign as a sales drive where the backers (they are not called investors on Indiegogo) paid 50% of the cost of a holiday package in advance. The packages varied from $600 for a week-long vacation for two people, catering for themselves, to $6,500 for a week-long, all-inclusive package for eight people. The backers paid the balance two months before the holiday date.
Although Lisa and Jake raised only 61% of their goal, they consider the campaign successful. With almost $67,000 raised in six weeks, they were able to quit their jobs and move to Abruzzo full time.
“The Indiegogo support team gave us a formula to estimate how much we would get in the campaign,” says Jake. “If we had followed their advice, we would have met our target.”
If the campaign does not meet the goal, Indiegogo charges a higher fee, 9% of the money raised—but you get to keep the money. Other platforms will simply return the money to backers if the goal isn’t met. The fee drops to 4% if you hit your fundraising target. There is also a payment processing fee of 2.9%, which you have to include in your goal.
Most crowdsourcing sites have training materials available online. Make sure you study those and ask customer service for help if something is not clear.
Lisa and Jake followed the tutorials that Indiegogo offered. “They are fantastic,” says Lisa. “The platform has a team of people who respond to your emails right away. They give good support.”
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