There are various reasons why online sellers might choose to use ecommerce crowdfunding platforms.
For example, you may have an exciting concept but don't know if it is marketable.
Or you want to test the water before investing more time and energy into your project.
No matter the reason, ecommerce crowdfunding can be a valuable tool in your marketing arsenal.
Regrettably, creating a successful crowdfunding system ideal for any ecommerce brand cannot be approached with a single mold.
Nevertheless, comprehending the fundamentals of crowdfunding and optimizing its advantages enables you to put together an attractive fundraising program suited to your business's different objectives.
So, read along and learn about different types of ecommerce crowdfunding, the best platforms for it, and how to choose the right one.
Crowdfunding is a method of raising capital to finance projects and businesses. At first, it served as a way of promoting specific ideas and projects and ascertaining interest.
But as time has passed, it has become a reliable method for startups and expanding businesses to access funds as an alternative to traditional bank loans.
Using the Internet, businesses can collect little donations from many interested parties, most of whom are ordinary public members.
Crowdfunding may also be a means of creating a network of support for your product.
You may access new consumers and acquire vital market insights by using the strength of the online community.
But we will discuss this in more detail below.
Businesses that want to raise money through crowdsourcing must be innovative in persuading people interested in their idea to move forward and invest.
Investors want to have the assurance that their money won't be spent on a shoddy idea.
However, what spurs funding for one initiative may only sometimes encourage financing for others.
The most effective crowdsourcing initiatives adapt their strategy to their audience, target investors, and objectives.
There are several different sorts of crowdfunding, which are described below.
However, equity-based and rewards-based ecommerce crowdfunding are the most popular varieties.
Rewards-based crowdfunding provides incentives to contributors. And practically anything may be one of those benefits.
For example, a gift, an invitation to a launch party, a reduced membership, or any other preset prize, especially if the investment is modest.
It is an excellent source of funding for initiatives that seek to finance a product prototype and depend on generating revenue to be successful.
While obtaining no monetary or material benefit, people make small donations to help a particular humanitarian cause reach its bigger financing goal.
It is usually a crowdfunding type reserved for NGOs or charities. Here, the motivation is to organize a group around a common cause or ethical issue.
In the debt crowdfunding method, investors buy bonds or other debt securities that the business has issued, and allows you to borrow from multiple investors instead of just one.
While with lending-based crowdfunding, you are merely taking out a short-term loan and paying it back with interest.
The stock market has been streamlined in this manner. Until the required amount is raised, several investors contribute.
In exchange, they are given some stock or a portion of your future revenues. In a sense, they are joining your company as partners.
Equity-based campaign participants are not seeking a quick return on their investment; instead, they are investing in a business because they believe in it.
To make it simpler, the famous TV show Dragons' den is based on equity funding.
So, for example, a small business asks for £50,000 push in exchange for 20% equity.
This way, investors will become partners, and personally involved in the future growth of the business.
In exchange for funding today, businesses offer the crowd a percentage of their projected earnings or revenues.
Businesses looking for money promote their campaigns and offer prizes to those prepared to contribute some funds.
For example, businesses wanting to raise money to launch a new product sometimes offer the item itself as a thank-you to contributors.
Higher amounts of funding might result in more products, a more expensive version, or public recognition.
Most platforms demand businesses provide a budget for their crowdsourcing campaign, which usually takes around 30 to 90 days to complete.
While some platforms utilize an all-or-nothing strategy that returns cash to individual donors if the goal still needs to be reached.
On the other hand, others use a methodology where all money is sent at the end of the campaign, whether or not the objective has been attained.
Let's break it into simple steps. For example, you created clothing items with leather made from cacti, and you want to advertise it as an eco-friendly, sustainable solution.
Let's say your goal is to obtain €25,000. It is a lot of money, and most people are unhappy throwing their hard-earned money into vague ideas.
So, the first thing is to pause and put yourself in the mindset of potential benefactors.
Explain your concept in simple, straightforward language, offer a development strategy with realistic goals, and—most importantly—show how your online store will be better than already-running online stores.
Finally, instead of making hollow promises, arouse interest and involvement by promising something for their cooperation.
When you are confident that your online business will be successful, you should consider the risks and explore the benefits and drawbacks of ecommerce crowdfunding.
Is ecommerce crowdfunding the right solution for you?
Let's start with the benefits.
For example, if you have an online clothing store and you want to incorporate new products, take notice of the magic of social media.
Investors are more willing to contemplate investing in you if you start a crowdsourcing campaign for your idea, and it becomes widely popular thanks to social media.
Another benefit is that there is no upper limit to the amount you may choose as the required minimum or maximum gift.
But remember that you need to be realistic with your desired amount.
Additionally, there are no risks involved in ecommerce crowdfunding. Simply put, people won't invest if they don't like your idea, and if you don't get paid, you don't have to make the product.
And lastly, let's not forget about the actual funds.
Also, the nicest thing about the cash earned is that, in the case of ecommerce, they are traded for non-material benefits like enjoyable shopping experiences and original goods.
Long before you launch a campaign, ecommerce crowdfunding demands work and effort. Before starting your business or disclosing your goods to the public, you should plan at least three months of preparation.
To ensure that the content of your campaign can inspire and motivate individuals with no prior experience with ecommerce, commit to the initial research, identify your niche and target audience, develop some marketing materials, and do some testing.
This path can be exhausting, and success is not guaranteed.
If you don't have the time or skills to prepare to launch an ecommerce crowdfunding campaign, consider taking an ecommerce loan.
Another essential thing to remember is that even if you raise all the money you need,if you use one of the crowdfunding platforms, they will keep a certain percentage of it.
Let's look at some of the top ecommerce crowdfunding platforms available today that you may utilize to generate money for your next campaign.
Fees: Between 5% and 12% of your monthly income, depending on your Patreon pricing plan.
Best for: Artists, content creators
One of the most distinctive ecommerce crowdfunding platforms on our list is Patreon, which specializes in supporting the new generation of artists, including bloggers, YouTubers, podcasters, cartoonists, musicians, live streamers, and others.
The company's strategy for reward-based crowdfunding has made it a very well-liked option for content producers worldwide. In exchange, producers may provide their "patrons" with exclusive content.
Additionally, its variety of financial tools makes it easier for artists and content producers to handle their finances.
Best for: Shopify stores
The Crowdfunder app for Shopify is a wonderful match if you currently have a Shopify store and are interested in financing a new product through your website.
With the help of Crowdfunder, you can convert a product page on your website into a crowdfunding page with a progress bar, establishing your goal based on a predetermined minimum amount of merchandise sold or funds received.
To both verify a concept and finance manufacturing, it operates by taking pre-orders from customers.
Then, you can use it to introduce limited-edition items, test new product concepts, or raise money for a good cause.
Fees: $179 per month when campaigns are running, as opposed to a percentage of the total amount raised (not including payment processing fees).
Best for: US-based startups and small businesses
One of the leading crowdfunding platforms, Fundable, enables US startups to exchange rewards or stock for funding.
On average, startups that provide prizes generate less money overall (under $50,000) but attract more supporters than those that employ equity crowdfunding, which often raises more money from fewer investors.
However, to be successful with equity crowdfunding, you must at least provide a history of growth, a strong business strategy, and a pitch deck.
Fees: 7% of funds raised, plus a completion fee ranging from 0.75% to 1.25%, if you reach your target. Processing costs vary.
Best for: UK and Europe small businesses
The equity crowdfunding website Crowdcube is based in the UK.
Although there aren't many campaigns on Crowdcube, those who are accepted and meet their fundraising targets can join the company's Funded Club and receive special privileges from its partner organizations.
You may publicize your proposal to attract investors from your network or the established Crowdcube community.
As you've seen from this guide, there are many benefits to using ecommerce crowdfunding.
Still, there are quite a few drawbacks.
For example, ecommerce crowdfunding is not an ideal choice for you if you need funds immediately, if you don't have time or skills for a perfect pitch that will attract your investors, or if you simply have a brilliant idea that you don't want to put out publicly just yet.
In that case, Myos has a solution. With us, you may place more orders, introduce new products, or spend money on marketing, which can boost your revenue and earnings.
Without any personal risk or guarantees, it is possible because we use your goods as security. Moreover, within 24 months, the payback schedule is flexible.
If you decide after a week that you no longer want the funds, you pay them back, and the project is over.
And without additional fees.
You may select from two options based on your requirements:
Contrarily to ecommerce crowdfunding, your financing request should be reviewed within 24 - 72 hours.
So, if you are a small business owner wanting to expand, join Myos now and enjoy all the benefits with your growth partner.