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Are you thinking of starting your own business but don’t have enough funds for the venture?
There are several things you can try to raise funds for your new business. You can borrow money from friends and family.
You can take out a loan from the bank. Or, you can try crowdfunding.
What is Crowdfunding?
From the words “crowd” and “funding”, crowdfunding is basically when a crowd (a considerable number of individuals) funds a business or a project.
In crowdfunding, the vast networks of people are accessed through crowdfunding websites and social media. Aside from bringing entrepreneurs and investors together, crowdfunding also encourages entrepreneurship since it expands the pool of possible investors beyond the usual circle of owners, family and friends, and venture capitalists.
Thanks to crowdfunding, entrepreneurs can raise anywhere from thousands to millions of pesos from anyone who has money to invest. Also, people have a forum where they can pitch their business ideas to waiting investors.
There are hundreds of projects on crowdfunding sites and investors can make an investment for as low as $10. Crowdfunding platforms bring in revenue from a small percentage of the raised funds.
However, there are restrictions on who can fund a business and the amount that they can contribute. These regulations are in place to protect non-wealthy or unsophisticated investors from going all in and risking all of their savings.
A lot of new businesses fail, so the risk of losing their principal is high for investors.
Types of Crowdfunding
Traditionally, the types of crowdfunding are reflective of its purpose.
One type is when start-up companies looking to introduce a product or service to the world. Another type is when individuals who had some kind of emergency ask for financial relief. Many people who have been affected by hefty medical expenses, a natural disaster, or another tragic event like a house fire have been able to raise funds thanks to crowdfunding.
Without these platforms, they wouldn’t have been able to do that.
However, in the past few years, some crowdfunding platforms like Patreon and Substack have expanded the reach of crowdfunding.
They offer creative people, such as artists, musicians, writers, or podcasters, a way to carry on with their creative work without worrying about their source of income.
Benefits of Crowdfunding
Similar to other business financing methods, there are several benefits to crowdfunding in the Philippines.
You can acquire funds efficiently.
It is quite risky to bootstrap your own business, especially if you have a small cash reserve. On the other hand, applying for a loan at a bank or some lending company or finding an angel investor can take some time.
However, with crowdfunding, you simply share your business idea on a crowdfunding site and include a well-crafted and effective pitch.
Then, the people themselves will go to your page, support you and donate.
You can build new relationships.
At its core, crowdfunding is very social. Aside from the fact that you receive funds from different individuals, you also get to establish a relationship with them and build a community.
Your first customers will most likely include the people that you received money from. This is truly meaningful seeing as these people became your investors because they believed in your idea as well as your capabilities.
You can promote your business and convince more investors.
When you post your pitch, you’re basically promoting your business. The people who have invested their money in your business can share your pitch with family and friends.
This means your audience reach gets expanded.
It can be challenging to convince the bank, an angel investor, or a venture capitalist of the viability of your business because the time you need to explain all the details of your business idea is not always available.
However, with crowdfunding, time is not an issue. Prospective donors and investors can read your pitch, and see pictures of works in progress, prototypes, and other proof of concept in their own time.
You can collect valuable feedback.
As you build your crowdfunding page, you are also building a community for your business.
Donors or investors can give constructive comments, which can help you in improving not only your product design but also your process flow.
They can identify the things which you haven’t even considered before and help with closing some loopholes.
Top Crowdfunding Platforms in the Philippines
These days, there are many crowdfunding platforms that you can use, but here are a few that are popular in the Philippines.
Investree was founded in 2015. This leading fintech company caters to small and medium-sized businesses, and aims to improve the affordability and accessibility of working capital for the businesses.
It is the first crowdfunding platform in the country that has been approved by the Securities and Exchange Commission (SEC)1.
The first step in Investree’s process is you filling in the form on their website. They will contact you within 24 hours and then consolidate all the requirements.
Next, they will send you an offering letter within 3 business days after your application is completed. If you accept their offer, you can then proceed to the last step, which is to receive the money.
The interest rates of Investree are 1% to 3% per month and the tenor is anywhere between 14 and 180 days.
Aiming to support creative projects and help bring them to life, Kickstarter is a platform for creators to share their visions for creative work and get support from communities that will fund them.
Projects can be related to films, music, art, design, games, and technology. However, everything on Kickstarter has to be a project that has a clear goal, such as making a book, an album, or an artwork.
A project will be completed and will produce something.
Every project has a funding goal and deadline set by the project creator. People who like the project can pledge money to have it made. If the project reaches its funding goal, all the credit cards of backers are charged when the deadline is up.
However, Kickstarter adopts an all-or-nothing scheme in funding. If the project doesn’t reach its funding goal, nobody is charged.
Kickstarter collects 5% on the funds collected from a project that gets successfully funded plus 3-5% transaction fees.
One of the first crowdfunding sites, Indiegogo lets people solicit funds for a start-up business, an idea, or charity. It gives entrepreneurs a platform for launching new and groundbreaking products.
Thus, it helps surface innovations in design, tech, and much more. Aside from helping innovators raise money, Indiegogo also offers services that help bring your business to the market, such as marketing, prototyping, licensing, and distribution services.
Indiegogo has a $500 fundraising minimum to run a campaign. Regardless of the funding type you choose, the longest period you can run your campaign is 60 days.
However, the InDemand feature allows you to continue raising money after your campaign is over, without setting another fundraising goal or deadline.
All crowdfunding campaigns on Indiegogo are charged a 5% platform fee.
For those who are in the InDemand program, the platform fee remains 5% if you ran your first campaign on Indiegogo and 8% if you used another platform for your initial campaign. There is also a 3% to 4.4% transaction fee.
With GoGetFunding, you can raise money for projects, personal causes, events, and more. Forbes has listed GoGetFunding as one of the top crowdfunding websites in the world.
According to the publication, the platform is easy to use, and both public and private projects can be posted by anyone.
You simply have to register for a GoGetFunding account, create a page for your project, share the page on your socials, and then accept donations instantly.
GoGetFunding charges a 4% fee on funds raised and 2.9% for the payment processing fee. There is also a 0.30c handling fee on each donation made.
SeedIn is one of the largest Business Financing platforms in Southeast Asia. Local businesses that are seeking short-term financing can use the platform to connect with businesses and individuals who are seeking short-term investments.
To apply for financing, you will have to complete an online form. Then, you will be contacted by SeedIn and your application and options will be discussed.
Next, they will verify your eligibility. The facility amount will be confirmed as well. Lastly, you sign the documentation and SeedIn will transfer the funds to your nominated account.
You can receive the funds within 5 days of getting approved.
According to their website, Seedin doesn’t charge advance fees on businesses and there are no hidden fees. The interest rate and platform fee are included in the total borrowing cost.
Also, the interest rate is determined by the borrower’s unique circumstances.
A globally recognized organization, Cropital receives support from institutions in the United States, the Netherlands, Malaysia, as well as the Philippines.
They are a social enterprise that provides farmers access to financing that is scalable and sustainable.
For those who want to invest, they have to sign-up to view and choose the farms they want to invest in. When the farm gets fully funded, the resources needed to start farming will be provided to the farmers.
After the harvest and the produce gets sold, the capital will be returned and the profit shared will be deposited into the virtual wallet of the investor.
The for-profit crowdfunding platform GoFundMe lets people raise money for different types of events, from life events like graduations and celebrations to challenging circumstances, such as illnesses and accidents.
They pride themselves with having a Trust & Safety team that ensures your safety and a donor protection guarantee, which is the first and only one in the industry.
When you start your fundraiser on GoFundMe , you set your fundraiser goal and then tell your story.
You can add a picture or a video to your story and share it through email, text message, and on social media. Then, you can accept donations, thank your donors, and withdraw funds.
There is a 0% platform fee for organizers in the USA, UK, Canada, Australia, and most major countries in Europe, but a 2.9% transaction fee is deducted from each donation.
For campaign organizers in other countries, a platform fee of 5% plus a transaction fee of around 1.4% is collected.
A global crowdfunding service, Airfunding provides a platform for anyone in any country to easily and quickly create projects and raise funds for their loved ones, themselves, the community, or a charity.
Donations can come from around the world, and your project will even be translated to 17 languages. Airfunding also allows you to simultaneously open multiple projects .
The process of raising funds on Airfunding is similar to other platforms like GoFundMe. However, Airfunding gives you options when to withdraw the collected funds, either after your project ends or while it is still ongoing.
You will have to request a withdrawal of $100 or more if your project has not ended.
Airfunding keeps 8% of the collected funds as the support amount’s settlement fee.
The Spark Project
Philippine-based crowdfunding website The Spark Project aims to give promising entrepreneurs in the country the opportunity to make their projects possible.
It was launched in 2013 and has become the longest-standing crowdfunding platform that supports social enterprises and creative startups in the Philippines.
Like other crowdfunding platforms, The Spark Project also requires you to create a campaign, publish it, share it with others, and collect funds.
For both rewards-based projects and donations, a listing fee of P2,500 is collected before a campaign is published.
As for the platform fee, successful campaigns of rewards-based projects have to pay 10% of the total funds raised while unsuccessful campaigns have to pay 15% of the total funds raised.
Donations-based projects have to pay P1,500 for every month they run on the site.
Crowdfunding Tips for Filipino Entrepreneurs
Naturally, anyone who wants to try crowdfunding would want a successful campaign. Here are some things that you can do to help your project get the support that it needs.
1. Do your research
Before launching your campaign, you should learn as much as you can about crowdfunding. This way you will know how to best go about making a campaign and which platform best suits your needs.
2. Prepare well.
Make sure that the video and/or images that you include in your campaign are interesting and engaging because they provide the emotion of your pitch as well as demonstrate your credibility.
You should also remember that the wording in your campaign is critical. It has to give people the logical reason for investing in your project. Your preparation should also include your digital marketing campaign.
Pre-prepare what you can, like your emails, posts, and tweets that you can use at important points when your campaign is live.
3. Tap into your business’ community.
Needless to say, your business’ community is vital to your campaign’s success. The early support and investment that they give to your campaign can pique the interest of investors who haven’t heard of your business.
Also, there are hundreds of crowdfunding platforms and thousands of campaigns. The chances are extremely low for a complete stranger to stumble upon your campaign.
However, your business’ community, which includes your family and friends, can help share your crowdfunding campaign with other people.
4. Start promoting your campaign early.
Analysis shows that most successful crowdfunding campaigns already had at least a third of their funding goal committed before their campaign became live on a platform.
This means you have to work on getting investment and building your business’ fan base before you go live. When the momentum gets going, other crowd investors would want to follow.
5. Offer incentives.
This advice is not applicable for all types of crowdfunding campaigns. However, it is important to note that incentives can help persuade potential donors to support your campaign.
Just make sure that the incentives you give are something that donors would be interested in. You can also try offering different perks or incentives to different giving tiers.
If you do this, people are likely to go for a higher giving level or a level with a perk that they will enjoy.