Top Crowdfunding Platforms for Startups and Scaleups in the UK
Crowdfunding is one of the most popular and effective methods of raising startup money. Many new projects are getting their funds from various crowdfunding platforms lately. However, there are still a lot of questions to ask about crowdfunding. What kind of crowdfunding models are there? What is equity crowdfunding? What are the best and most popular crowdfunding platforms? What are the benefits?
In this article, we aimed to answer some of the questions you might have and take a closer look at crowdfunding and the best potential platforms.
What Is Crowdfunding?
As the name suggests, crowdfunding is the process of raising modest amounts of money from a large number of individuals to sponsor a project or business. Typically by using the internet.
How Does Crowdfunding Work?
Usually, there are a few things to decide before starting a crowdfunding campaign.
- How much money do you need to raise?
- How are you going to use that money?
- What are you offering for those who invest?
- How much time do you need?
After answering these questions, you need to decide on a crowdfunding model. Depending on the model, the process can vary a bit.
What Are the Types of Crowdfunding Models?
Donation-based Crowdfunding
It is one of the most popular and widespread models. You ask many people for small amounts of investments in the process. In donation-based campaigns, the donations of individuals may vary from as low as £1 to as high as thousands of pounds, sometimes even more. People donate to works that they believe.
Equity Crowdfunding
In this model, donors get a certain percentage of ownership in the company. The ratio may vary. Startups use this model when raising large amounts of money. But, again, the partnership possibilities are a plus.
Reward-based Crowdfunding
As the name suggests, you offer something in return, such as a reward, to the donors. The rewards can be books, gift cards, random gifts, or a sample or full version of the completed product or service that the startup provides.
Debt Crowdfunding
In debt crowdfunding, startups collect donations to pay back in the future. They use this model when they do not want to give out equity or rewards. Since the payback is guaranteed, people can be more willing to support the campaign. However, this model needs more clarity than the others with the campaign’s aim and the time of payment.
Hybrid Models
Even though there are certain crowdfunding models, there are no limitations on making them work. You can create your model by mixing the ones that suit your goals. The main goal is to convince your supporters.
Top 10 Benefits of Crowdfunding
- It Helps You Acquire Money Fast
It is one of the most problematic things that comes to mind for many startups. But, if there is a great idea but not enough sources to make it come to life, crowdfunding is a lifesaver.
- It Makes You Join the Game Right Away
Instead of waiting for certain things to happen to get started, you can start right away. It is essential when it comes to keeping your enthusiasm alive.
- It Reduces Risk
Instead of using your finances, you are using an external resource. It is good since you do not risk anything from your funds, especially when trying something new. If your campaign isn’t getting enough attention, it can make you reconsider before taking more significant risks.
- It Pushes You to Work
Many crowdfunding campaigns involve promising their supporters something in return, material or sentimental value. Giving promises can be a good way of work motivation.
- It Serves as a Marketing Tool
When running a campaign and asking for supporters, you also make your project known. People usually like new ideas, and if your project is interesting, they will notice and sometimes follow your progress. These people also turn into potential customers in the future.
- It Paves the Way for Potential Partnerships
If there are people like you out there, working on a similar or related project, your campaign might grab their interest. If you are also willing, you can create new partnerships with these people and share ideas that can be useful in your projects.
- It Opens Feedback and Idea Exchange Opportunities from Supporters
Often, crowdfunded projects share their progress with their followers and supporters. If you do so, you can get feedback and ideas from various people. Naturally, they will have a different perspective than yours, and their comments and criticism can be helpful.
- It Creates a Sense of Loyalty for Your Supporters
People tend to develop a kind of loyalty for such campaigns since they feel involved in the creation process. Loyalty and trust create a long-term effect that can make your brand stand out among others.
- It Builds Self-confidence
Especially if it is your first time creating your business, starting right away with the funds that you gathered with your effort can potentially boost your self-confidence. Believing in yourself and your work builds a solid foundation to help you through hard times.
- It Is Free
What is there to lose? Crowdfunding is usually completely free, and even if there are certain fees, the platforms typically take those from the raised funds. Therefore, even if your campaign does not reach its goal, you lose nothing financially.
How Do You Get Crowdfunding for Your Business?
First, you need to decide on certain abovementioned things to build your strategy. Then, after having a plan, you need to take your first steps. There are many crowdfunding platforms out there with varying methods and purposes. To find the best one that will suit your needs, you need to research. Below are some of the most popular crowdfunding platforms that can help begin your research.
Crowdcube
Crowdcube is a platform for startups and developing businesses to raise funds through equity crowdfunding. Individuals may invest in or loan money to small businesses through Crowdcube in exchange for equity or an annual return. Since they started equity funding in 2011, Crowdcube has raised over £300M from a crowd of over 390,000 investors, with over £230M invested in 520 raises.
SyndicateRoom
SyndicateRoom is a fintech firm comprised of data scientists, investment specialists, software engineers, and marketers. They build portfolios using a data-driven strategy to maximise returns whilst minimising risk for fund investors. Founded in 2013, they have invested over £260M to more than 220 companies, working with more than 1000 investors.
JustGiving
JustGiving is a leading cause-based crowdfunding platform that assists people in raising or donating funds for charitable and personal reasons. They have many categories, some of which are disability, education, health, and animals. They’ve helped over 21 million people collect £1.5 billion for over 13,000 charities and causes since their launch in 2001.
Seedrs
Seedrs, founded in 2012, is one of the leading online platforms in equity funding. They connect entrepreneurs with angel investors, venture capitalists, and other sources of seed financing. As of now, the platform has raised approximately £1.7 billion from 1,503 deals.
Funding Circle
Funding Circle is a debt-based crowdfunding platform. They connect creditworthy enterprises in need of funding with individuals and organisations with funds to give them. With Funding Circle, businesses can acquire money quickly and efficiently to help them grow, create employment, and support their communities. They are currently running a government-backed recovery program for companies with hard times due to COVID-19. You can apply for a loan ranging from £25,001 to £350,000, with annual interest rates ranging from 8.6% to 12.1%.
