The Basics of Crowdfunding for Your SaaS Startup
Crowdfunding is getting funds for business from a large number of people rather than one or two major investors. Check out crowdfunding platforms in India & crowdfunding types.
Raising funds for your company is challenging. It can feel like having a million conversations with a million doors being slammed in your face. As an entrepreneur, your journey begins with a passion for creating something and making money from it. You’ve built a functional product and gathered a group of early adopters. Though there are various financing options for SaaS startups, the looming prospect of angel or venture funding can be both exciting and daunting at the same time.
Getting to the point, it’s no secret that the crowdfunding industry is booming. For the uninitiated, crowdfunding might be alien as it's been a few years since it first burst into the scene. It has become a trend that is undoubtedly thriving in the SaaS startup industry.
Crowdfunding is a welcome phenomenon in the startup universe. It does not necessarily need to be synonymous with donations for charities. Crowdfunding is a way to get funding for a project or business from a large number of people rather than one or two major investors. It is different from funding by angel investors or venture capitalists.
While crowdfunding started with the same concept of raising funds, it is now being used by a much broader spectrum of businesses, individuals and organizations to get their idea off the ground. According to reports, transaction value in the crowdfunding segment in India is projected to reach US$7.6m in 2022.
Crowdfunding is a two-edged sword. On the one hand, there’s the stigma of it being an obvious scam, which often turns away people who might have been interested in your product or service. On the other hand, a massive pile of money is available through crowdfunding to help you get your business up and running. Well, we hope the types of crowdfunding might give you a clear idea.
Types of Crowdfunding
Crowdfunding is one of the most popular and easiest ways to raise capital for your business. However, you should know which type of crowdfunding is best for your SaaS.
Here are the most common types of business crowdfunding:
Donation-based funding is a form of financing available to small businesses and nonprofit organizations. It allows you to create a campaign asking for donations from the general public for providing funding for your business.
If you're a business owner looking for some extra funding, consider turning to debt crowdfunding. It involves borrowing money from other individuals instead of from a bank. You borrow at an annual interest rate and loans structured similarly to a traditional business loan.
In reward-based crowdfunding, people contribute money to your startup idea without taking any equity. All you have to do is offer them a product or rewards in return. Rewards crowdfunding is presumably the most familiar type of crowdfunding.
If you are looking for capital for long-term investments, equity funding probably might be your best bet. In equity funding, you seek funds for your startup by selling a piece of it to investors through crowdfunding platforms.
You’ve heard it before, and you’ll hear it again - funding your SaaS startup is not a magic bullet. And the crowdfunding arena, too, can be a curse if not done right. An awesome product or idea is just half the battle; you will win it with an effective pitch deck. You need to get people excited about it and ask for the right amount of money.
Focus on the story
The human brain likes pattern recognition and loves to consume information when it's broken into small nuggets. We get hooked to powerful stories. Funny enough, this is precisely how the potential investors will make sense of your business proposition. Impressing them with a captive storyline will prove to be the biggest factor in getting them to take that leap.
Get the logistics straight
When you’re setting out to deliver an actual product to your supporters, the most daunting thing is always behind the scenes: setting up everything and running. That includes -
- Production costs.
- Delivery costs.
- Time required to roll out rewards.
Unless you get the logistics sorted, you will have a hard time estimating delivery time and managing your supporters’ expectations.
Know how much to Ask
Of course, it seems like a good idea to ask for everything you can. But in reality, asking for the moon is not that wise. Getting your logistics costs straight and having a long-term plan for your business will help you set fundraising and business growth milestones. Crowdfunding is about building a community of supporters interested in your business. Stomping all over them by asking for everything in one go might not be a good way to go.
Crowdfunding platforms in India
Crowdfunding platforms help innovators and social entrepreneurs launch ideas and bring social change. And of course, they help startups raise capital. They have the potential to change the way startups and businesses raise funds.
The beauty of crowdfunding is not only limited to funding your projects but also extends to testing market acceptance, gathering feedback and business development. Here are some of the best crowdfunding platforms in India.
Kickstarter is one of the first crowdfunding sites in India. Films, books, research and innovation are some of the kinds of campaigns often seen on this platform.
Raising funds is the first step on Indiegogo. This platform focuses on actual products and bringing innovative ideas to life.
Wishberry is a crowdfunding platform for creative projects only. Art, comics, publishing, theatre, music and dance, the platform focuses on all things creative.
Fundable is a crowdfunding platform that is the best for small businesses. It mainly focuses on banking, travel, food & beverage, and fitness sectors.
Ketto is one of the well-known and wide range focused platforms in India. The platform features campaigns ranging from healthcare, education, sports, animal welfare and personal care.
With the increasing number of crowdfunding sites in India, entrepreneurs and investors have a great range of options to choose from. We have curated a detailed list of the top crowdfunding platforms in India for your startup.
Crowdfunding is exciting, but let’s get one thing straight: it’s not something that happens overnight. It's important to realize that running a successful campaign takes a lot of effort.
A majority of successful campaigns have proved that crowdfunding is an incredible way to raise the money you need for your business. And the world has given birth to many successful businesses with its help.