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Is crowdfunding right for your business?

Is crowdfunding right for your business?

Cash flow is an ever-present concern for business owners, and any new ways to scrape extra funds together should not be overlooked. Have you considered getting an online social network involved in your next project?

Here are some pros and cons of some of the more popular internet-based crowdfunding platforms to help you make the right decision for your next dream project.

Global platforms

Kickstarter is probably the most popular crowdfunding site at present, claiming more than a billion dollars pledged so far. Many types of creative projects are accepted, in areas ranging from technology and publishing to film, music and fashion.

Its all-or-nothing funding model means your project will only receive money if your funding goal is reached. Kickstarter’s fee is 5 per cent for every successful project and its reward feature can be used to offer special incentives to more generous backers. An Australian version of the site came online in late 2013.

Another popular platform, Indiegogo, is open to a wider range of projects, including charity causes. A 4 per cent fee is levied if your target is reached, and if it isn’t, the flexible-funding feature allows you to access the money minus a 9 per cent fee. Beginning in late 2013, donations can now be made in Australian dollars.

Australian platforms

If you’re looking for home-grown business crowdfunding, Pozible could be the answer. It’s especially popular for art, music and community-building projects. Like Kickstarter, funds are only disbursed when the funding target is reached, and you can offer rewards to supporters. Reduced fees apply if you can raise $100,000 or more.

Crowdfunding for small business is the main goal of the Australian Small Scale Offerings Board, or ASSOB. It has been offering equity-based crowdfunding since 2005, and has successfully raised more than $138 million for its beneficiaries to date. One major advantage of their model is that an ASIC-registered prospectus isn’t required. This special provision does, however, limit total funds raised to $5 million.

The recently launched VentureCrowd platform also uses an equity-based crowdfunding model, where investors are given equity in your new business in exchange for their money. The platform targets “Australian early stage, high growth potential start-ups”, with possible backers including angel investors, corporations and universities.

Crowdsourcing of funds can be a great low-risk way to raise money for your projects. The main challenge is to find an audience that is willing to back your idea with their cash.

Still not sure if crowdfunding is the answer for your business? Learn more about the basics.

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