The crowd funding concept is quite new and innovative as it involves launching a venture with the help of donation from the group of people on the internet. Generally the objective of the business is to create products or services that are beneficial for the investors and the prospective customers. It has become a popular source of funding in recent times riding on the spread of social media far and wide across the globe.
To start the crowd funding process 3 agents are involved. It is important to include the person or the group of people who proposed the idea from the ground up. Afterwards, the concept is supported by the people who believe in it and ready for implementation and the third is the platform or the social media website that brings the investors and the project team together.
As far the European crowd funding is concerned, it has been formed to help the web start ups all across Europe for changing the service environment in an impeccable manner. One of the main advantages of the crowd funding is that It will help lots of web entrepreneurs to convert their ideas into actions and realize their dreams of expanding the businesses.
One of the stimulants for the European crowd funding is due to the increased expansion of the internet and the people connecting with each other through the numerous modern gadgets that are hitting the market with a break neck pace.
Due to the crowd funding, the small and medium sized businesses got a new lease of life. European commission is also on board with supporting the crowd funding initiative as it will bring in new lease of life to the economy. EU has decided to frame laws that would help to regulate the whole process of crowd funding.
There are different types of crowd funding falling under different categories that are as follows:
1) Donation: It is particularly focused on the charitable causes promoting social entrepreneurship on a huge scale. People get convinced by the project and might donate money according to their requirements and specifications.
2) Reward: It pertains to various fields such as motion picture funding, software application development or any type of scientific research. One of the most attributes of reward based crowd funding is that it sometimes operates on all or nothing principle. Therefore, if the company is not able to achieve the objectives it doesn’t keep the fund.
3) Equity peer to peer funding: It is initiated when the organization or group of people combine together to form a fund pool for implementing the project. It is not a debt category fund that has to be returned but equity based proposition.
Platform for the European crowd funding might vary as it pertains to different types of industrial verticals. They can refer to sustainable development or the social entrepreneurship. Niche platforms are also available for individuals who have interests in art based projects or digital sphere.
Determining the Cost:
• There are various types of strategies to zero in on the cost. For instance, the investors might have to pay the whole money upfront.
• In some other cases, certain sum of money is charged for registration from the users before they could launch the crowd funding campaign.
• In the course of campaign, the transaction costs include charges on each online transaction. It can be added on or paid off by the project implementer.
• Commission is one of the most important parts of the funding that will be deducted by the platform responsible for ensuring the meeting of the project initiator and online investors. It will a small fraction of the total crowd funding.
Setting the objective of European crowd funding:
• It is important to set the budget before moving on to the internet for crowd funding venture. Depending on the objectives, one has to decide the input cost in a seamless manner. In order to ascertain the cost, you should undertake research and try to find the cheapest alternative to achieve the stated goal. It will help to lower the input cost and make the venture more efficient from a long term perspective.
• Another vital factor that can impact the crowd funding amount is the timing of the campaign. In a nutshell, it depends on how quickly it is required to generate necessary funds for the business. Sometimes seasonal events such as festival can have a positive impact on the business venture, so the project owners might be requiring the money quickly. Mapping the external events it is important for the users to plan out the crowd funding without any hassles.
• The goal should be realistic and not lofty as collecting money through crowd funding is easy but would it be possible for the company to meet the expectations of the project. In hindsight it can be said that if the target budget is lower, it would be possible to meet the objectives within the shortest possible time.
• European Union is stressing on the making the crowd funding procedure a source of enticing rewards so that the target of the projects could be met. You can create the perk but follow certain tips that make them attractive for the people.
• For instance all the perks should lie in the range of 25 to 100 Euros as majority of investors would be perfectly comfortable with the amount. Another important factor is the popularity of the product. If it is a music album, crowd would be pledging money to buy the application or the CD.
• Many companies have mastered the idea of creating scarcity of a product in the market. It helps to generate curiosity among the customers and they flock to purchase the items. The strategy is a wonderful way of clearing the inventory before the new items arrive.
• The backers are the real investors you should not provide them the product at the retail price but give them an exclusive discount. It would help to strike a chord and generate more crowd funding opportunities in the future.
• Cost of the perks should be low so that it can accommodate shipping prices as well. Hence, the person would feel that he or she is getting rewarded in return. There are instance when one might face issues while creating perks. In such situations inspiration from similar campaigns in the past would do a whirl of good to the project owner.
Contribution of Social media towards crowd funding:
• Before launching the crowd funding campaign, log on to the social media such as TWITTER or Face book and interact with people who might be interested in the project. It is vital to follow them on a daily basis in order to understand the requirements and specifications.
• Face book might have plenty of communities dedicated to your idea. One can become the member and share ideas with others. It will go a long way in popularizing the objectives of the product.
• Engaging the social media audiences is necessary as form the backbone of the crowd funding campaign. RETWEETING and interacting with members on LINKELDN would go a long way in delivering wonderful results to the users.
• Word of mouth publicity is bound to make the item or the services popular among the online community. Hence the success of the crowd funding operation increases by many notches.