Imagine that you’ve just invented the coolest idea, stock, or startup in the world, and now you’re thinking about how to bring it to market so that people can buy it. You need crowdfunding software. You start calculating how much it will probably cost to print and produce the other components, packaging, distribution, and a bunch of other stuff. And all of a sudden you find out that before it’s even in the stores, you’re going to have to spend a lot of money.
Luckily, there’s a community of interest willing to support your endeavor and pay for the idea before it’s even created. If you can convince others that it really is the coolest idea in the world, or at least good enough, you’ll secure production funding and get a little closer to making your dream come true.
For the fundraising process to be conducted and approved by the supervisory authorities, before registering a company for crowdfunding it is necessary to make a business plan and analyze the market, prepare pilot projects and promote them among potential sponsors. Such preparatory work requires careful elaboration and adaptation to the current legislation of the jurisdiction where the company will be established. That is why entrepreneurs are usually recommended at the early stages to contact specialists, who can advise and provide proper legal support at all stages of the launch of crowdfunding.
To open a crowdfunding account and get the desired effect from it, you should choose the right place and time. In order to contribute funding, investors will need to log on to a crowdfunding website, which is a technically equipped platform designed to automate many processes for funders and fundraisers. Those who want to raise funds can be a business, an individual, or a social enterprise. If you need help with crowdfunding registration or support with entering crowdfunding platforms, you can contact our subject-matter experts.
Advantages of crowdfunding platforms
- a wide range of interested financial donors (e.g., Fundable platform, Kickstarter, and Indiegogo);
- the form of the proposal: a bet on the mission and values of the business, which helps to gather the most important information;
- virtually free targeting: through social media, potential contributors are instantly and directly influenced, generating trust;
- responsiveness: due to the interactivity of crowdfunding platforms, it is possible to respond quickly to demand and improve offerings
- fast results: on the network as a publicly accessible information base, the maximum concentration, and redistribution of fundraising efforts are achieved, reaching the goal as quickly as possible.
How to start crowdfunding
If you want to raise money with a crowdfunding campaign, you should follow these steps:
- Choose your platform. Different crowdfunding platforms serve different purposes. Some online platforms require participants to reach a predetermined financial goal within a certain period of time in order to receive funding, while other platforms allow you to keep any donations collected without reaching the goal.
- Before launching a crowdfunding campaign, determine the minimum amount of funding that will be needed to launch a business, pay off debt, etc.
- Determine the duration of the campaign. Creating a short-term campaign can be a good way to generate interest and urgency among potential donors. However, if your campaign timeline is too short, you may not have enough time to tell a large group of people about your crowdfunding project. If the campaign lasts too long, your fundraising efforts may not pay off.
- Identify your audience. Targeting the right audience is one of the most important considerations of crowdfunding. You need to determine who your target audience is, who your project benefits, and how your innovation can solve a problem. A good campaign is only as good as the people who are interested in it. Studies show that most fundraising happens through pre-established relationships.
- One of the best ways to drive a successful crowdfunding campaign is to make a short pitch video explaining why people should donate money to your project. An idea, a clear and concise description of the project, and brevity are the keys to creating a pitch video that usually resonates with donors.
- Offer special incentives. If you’re launching a campaign on a reward-based crowdfunding platform, create special incentives that potential donors will love.
- Ensure active conduction. To make crowdfunding work for you, you should spread the word. The best way to share crowdfunding campaigns with the masses is through social media, email, and text messages. Sending out a monthly e-newsletter is also a great way to inform your network about your campaign. Press coverage will draw more attention to your campaign and provide sustained brand awareness for your startup.
- We are ready to advise you on how to gather the necessary documentation and the steps to prepare your company for crowdfunding.
Crowdfunding registration: regulation
Before setting up a company and opening a crowdfunding account, you should understand the regulation of this type of funding in your chosen jurisdiction. In most countries, loans and public offerings of investment instruments are strictly controlled by the authorities. Accompanied by specific commitments, they are usually the prerogative of banks and authorized financial institutions. Public offerings of investment instruments, a category into which crowdfunding projects with a share of profits fall, include, for example, relatively heavy obligations, such as obtaining regulatory approval and publishing a prospectus detailing the transaction. These obligations run counter to the basic principles underlying the concept of crowdfunding itself: flexibility and simplicity.
If you are considering launching crowdfunding, for example, in the United States, it is important to keep in mind that if a company wants to offer and sell securities through crowdfunding, it must comply with federal securities laws. Under federal securities laws, any offer or sale of securities must be registered with the SEC or be subject to an exemption.
Crowdfunding regulation in the U.S. provides an exemption from registration requirements for securities-based crowdfunding, which allows companies to offer and sell their securities for up to $1.07 million without having to register the offering with the SEC.
As mentioned above, regulators in many countries are taking a number of steps to develop and implement an oversight regime for crowdfunding as a key element of fintech. To get advice on legislative regulation, register a crowdfunding company and open a crowdfunding account, contact the experts at LenderKit at the contacts listed on the website. We monitor current legislative changes in this area and are ready to provide you with expert legal services.
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