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This article is a continuation of my series on crowdfunding, started with a general description and a list of pros and cons. Read the following to get advice of successful campaigns.

1. Convince Your Folks to Be the First to Invest

To convince the public that your idea deserves financing, start with promoting it to your friends and family. If they believe your project is innovative or has potential, they will be the first to support it. This will also be an indicator of success.

2. Prove That Your Project Adds Value to the Community

As those who will support your idea are members of a local or global community, they need to understand very clearly what exactly you intend to launch and, furthermore, what its real value is. If you succeed in explaining clearly all these aspects, the public will adhere to your plan and will contribute financially to its putting into practice.

3. Choose the Spot as Presentation Method

According to recent studies, the general public responds better to audio-visual content than to written content. To present your project, make short spot showing in a creative, authentic and personal manner how your project differs from everything else that exists on the market.

4. Offer Rewards to Supporters

The crowdfunding platforms offer the entrepreneurs the possibility to reward the financing community according to the support received. Considering the financial contribution, the rewards may be price discounts or the product itself, once it has been created. In case of musicians, for instance, according to the value of the financing, a reward may consist in the album in digital format (mp3), the CD, or vinyl edition, or various “deluxe” packages.

5. Invest in Promotion

Any new business idea requires a promotion strategy. Crowdfunding, however, takes lots of attention dedicated to the community members in order to create long lasting connections or to answer questions related to the product. And this means interaction on the social media that are popular in Romania. The more you succeed in communicating efficiently to the general public, the better chances you stand to raise the funds necessary to launching your business.

This article continues my series on crowdfunding, started with a general description here. According to some sources, globally, there are more than 600 functional crowdfunding platforms, which manage to raise billions of dollars every year. Kickstarter, Indiegogo, Crowdfunder or  have given entrepreneurs, artists, musicians or non-profit organizations the opportunity to raise money for a cause or for achieving a cultural product. The persons who choose to support such projects do that based on a creative description of the idea (a brief video spot, most of the times) and may receive in exchange various rewards, services or the actual product (once it is launched on the market). If they are not prepared to promote the idea on the international crowdfunding platforms, the Romanian young entrepreneurs may resort to local platforms, such as We Are Here, PotSIeu, or Crestemidei. For several years now, these have given financial support to innovative projects, from jazz albums to scientific research or educational programs.

Pros and Cons of Crowdfunding

Roughly speaking, we may speak about two pros and two cons of this financing option. Let’s start with the first two pros:

1. The strategy I am talking about allows the entrepreneurs to consolidate their companies and overcome the financial difficulties irrespective of the phase in which the companies are. As long as the general public is presented with a very detailed plan of their future business, the entrepreneur stands good chances to get financing for it.
2. Another pro is the fact that besides the funds collected, there is obtained a database of potential clients, which already hold information on the new business, are happy with the results and, furthermore, are interested to buy, test and promote the product.

In respect of cons, we may list the following:

1. Before launching the startup, the only way of convincing the public to support it consists in presenting the idea in a sufficiently clear and attractive manner. The purpose is to determine the public to donate, not in order to make any earnings, but just because they trust that the new business will be a success.
2. Most crowdfunding websites will not give out the money raised, unless the final objective is reached, that is the whole amount is raised, they will only give out that, as soon as it has been raised.

You may find various tips on a successful crowdfunding campaign from the third part of our series.

The rapid adoption of the digital technology has changed the way we interact. Although according to some specialists the effects are not entirely positive – massive layouts further to upgrading production processes, the lack of human interaction – digitalization has improved productivity, communication, has simplified processes and managed to reduce bureaucracy. This background is favorable to the development of startups or small and medium size businesses, including with regard to obtaining financing, although, according to surveys, 96% of entrepreneurs go bankrupt within the first two years as a result of scarce funding. In this respect, one of the most intrinsically technological ways of financing a business is the so called crowdfunding that is small amounts obtained from a big number of investors, as it is almost unconceivable in the absence of an online platform.

Evolution of the Financing Methods

To understand how we have got to crowdfunding, we should go through the various types of financing accessible to startups.

1. By the year 2000, the newly launched businesses obtained financial resources from banks or investment funds, if they had employees, proved to be profitable or offered collateral to secure the loans. Getting a loan or attracting investments involved, as same as in any other type of financing, the existence of a well-structured business plan, which guaranteed the multiplication of the initial investment or the return of the loan. Any financial institution would analyze the file and try to assess how well the business worked, in order to make sure that, besides covering operational costs, all shareholders should make a profit.
2. After the year 2000, the innovative startups in the field of technology have changed not only the way we communicate, work or live, but also the conditions for obtaining financing. It is in this period that more and more Business Angels have come up to encourage the launching and development of startups, choosing to believe in the potential of a business against the background of the digital technology development. Business Angels or Angel Investors allocate smaller financing as compared to investment funds, but the financial support is obtained in simple contract terms (they choose not to interfere with the operational management), irrespective of the financial results or number of employees.
3. Currently an innovative idea may be supported financially by each of us by means of crowdfunding.

Specifically, crowdfunding, as a method or raising funds online, by means of communities, came out in 1997 and has gained scope after 2009. Currently, this financing form for an innovative product gets new dimensions, thanks to the existence of cryptocurrencies.

A Very Brief History of Crowdfunding

• In 1997, a British rock band financed their concert by raising funds from fans. 
• In 2000, ArtistShare platform was launched on the market and, shortly after, the concept has started to attract the public attention.
• Crowdfunding has gone full-fledged and tripled its financing the financing from 2009 to 2011, from $ 530 million to $ 1.5 billion.
• In 2011, President Obama approved a law called JOBS (or the crowdfunding law), which allowed the entrepreneurs to disclose to the public that they were raising money.
• Fundable has been the first business platform, launched by Will Schroter, after the adoption of the JOBS law, meant to help the entrepreneurs raise funds. 
• In 2013, Mastercoin was the first cryptocurrency financed by crowdfunding (ICO – Initial Coin Offering)
• In 2017, 18 platforms promoted ICOs, such events becoming more and more popular.

I’ll continue the crowdfunding series with Platforms, pros and cons and tips. 

Octavian Pătrașcu gave Profit.ro details about his experience as a minority investor in Vector Watch, the Romanian startup that was sold to the famous FitBit wearables company. Pătrașcu said his financial involvement in the project meant interacting with a young, progressive team, Silicon Valley procedures but, at the same time, strategies well connected to the Romanian business realities. He added that Vector Watch was a step to other similar projects, such as the ConsultaClick.ro online healthcare platform or the creation of a startups hub. You can read the entire story in Romanian, on Profit.ro.

The Profit business site published a story on Octavian Pătrașcu's investment in ConsultaClick.ro, a healthcare platform launched in Portugal that subsquently became operational in Spain and Brasil. In Romania, the project gives access to over 3,900 doctors and facilitates the optimal and transparent scheduling of an appointment. Pătrașcu told Profit he took the decision to invest because of the social component of the project, which makes it compatible with his investment objectives. You can read the entire story in Romanian on Profit.ro.