Which form of financing is suitable for me?

More and more founders and young companies decide to implement crowdfunding to realize their business ideas. There is many good reasons for crowdfunding.

Crowdfunding as a financing instrument

as alternative financing option crowdfunding supplements the classic forms of financing such as B. Bank loans. If banks refuse to finance the project and external capital is required, crowdfunding can be used to finance the start-up phase for a product or even the entire further development of the company.

Crowdfunding as Proof of Market

Crowdfunding can also be used as a Preliminary stage of capital acquisition be seen. It is not uncommon for credit institutions to justify the rejection of projects with the lack of a so-called proof of market. This is proof that the product or service is marketable. Of course, this presupposes that there is a market with sufficient demand and a functioning product. Crowdfunding is a great way to get your first customers and get intense feedback on product improvements. With the first sales figures and the optimized product, you can then approach investors such as B. Approach credit institutions and investors.

Crowdfunding as a marketing tool

Crowdfunding is an excellent marketing tool. Properly designed, the implementation of a crowdfunding campaign leads to an increase in reach, media attention and a strengthening of customer loyalty. Crowdfunding still has a very authentic character, which means that anyone who learns about a product as part of crowdfunding does not usually associate it with advertising. For founders and start-ups in particular, crowdfunding offers the opportunity to get exactly what you want position and anchor it in the minds of interested parties.

However, the planning, implementation and follow-up of a campaign accompanying the crowdfunding are included much effort tied together. The decision for or against this option should therefore be well considered.

So founders and young companies are facing the question: Is my product or business model suitable for crowdfunding? And if yes: Which type of crowdfunding is suitable exactly?

Before further history of this article a scheme for decision-making is presented, here we again present the two types of crowdfunding most relevant for profit-oriented companies.

Two types of crowdfunding

For profit-oriented companies, the forms “classic crowdfunding” and “crowd investing” are particularly suitable for the realization of their projects.

1. Classic crowdfunding

Classic crowdfunding is also often referred to as reward-based crowdfunding. With traditional crowdfunding, the supporter receives something in return for their contribution. Most of the time it is one type pre sales: Someone who wants to launch a new shoe brand offers their unproduced shoes at a discounted price well in advance and finances the first batch of produced shoes with the funds received from the crowdfunding.

Classic crowdfunding is suitable for concrete project financing with a moderate volume.

2. Crowd investing

Crowdinvesting is also often referred to as equity-based crowdfunding. In crowd investing, the backers referred to as investors become direct involved in the company’s success. If a company offers shares, the investors receive a corresponding share in the current profit and in the profit in the event of the company being sold. However, the investors do not actually become shareholders. They only participate in the company’s success in the form of differently structured subordinated loans.

Crowdinvesting is particularly suitable for long-term and high capital requirements.

But is my project even suitable for crowdfunding?

The scheme below represents a guidance It takes you step by step through the questions that every start-up and young entrepreneur should ask themselves with regard to crowdfunding. By answering the questions, you can find out whether and for what type of crowdfunding is an option for your project.

Crowdfunding vs. crowdinvesting: scheme for decision making

Illustration: Crowdfunding vs. crowdinvesting – scheme for decision making

Is the project suitable for classic crowdfunding or crowdinvesting? Excellent! Then further considerations on the implementation of crowdfunding make sense. The effort of such a project should not be underestimated. To have to decisions to be hit:

  • Which platform is right for me?
  • Which factors are relevant for the success of my campaign?
  • How do I do it all?

Classic crowdfunding provides others requirements of a successful campaign than crowd investing.

Successful campaign with crowdfunding or crowdinvesting?

Classic crowdfunding aims to wow the crowd. Creativity and instinct are required. Designing the rewards, formulating the project page, finding the right tonality in the pitch video: crowdfunding is an art in itself. But the best campaign is useless if it doesn’t reach the right target group. Success stands and falls with a detailed communication plan. Non-specialists should definitely get professional support in the area of ​​marketing (Tip: find a marketing consultant).

crowd investing on the other hand, tries to convince investors on a factual level. Investors want to invest their money well and safely. Therefore, the process of including the project on a crowd investing platform is also correspondingly complex: a business plan, financial planning and a number of additional documents are required so that potential investors can get a comprehensive picture of the company. Non-specialists should definitely get professional support in the form of business start-up advice when creating the documents.

Professional crowdfunding campaign with funded advice

Whatever type of crowdfunding you choose, crowdfunding is a extensive endeavor. Each type has its own peculiarities. The conception and preparation of a successful campaign can take weeks, but it is also rewarded accordingly. If you want to increase your chances of success and use crowdfunding as a concentrated marketing tool or for financing without losing voting rights, you can get support from a professional management consultancy.

The use of a professional management consultancy can be subsidized through the BAFA program “Promotion of Entrepreneurial Know-How”. There will be one 50% of the costs reimbursed.

If you are interested in crowdfunding or have questions about the funding shown, we will help you our experts You are welcome to continue on the free number 0800 – 58 95 505, you can also do our free subsidy check or search directly for a certified consultant.