“We have been training students for years to get funds from angel investors, banks and venture capitalists”, says Dr Jane Chang, senior lecturer in Marketing at Westminster Business School where she specialises in entrepreneurship education. “But they find this difficult. So, two of them came to me and said ‘hey Jane! We think we should try crowdfunding!’”.
Jane was, initially, sceptical, “I said no, but agreed that if they found out more about crowdfunding, and taught me what it means, I might be convinced to let them try.” Her students converted her. “Crowdfunding is something quite disruptive,” she says. “It’s the new way of getting income revenue to seed your idea into a business and into something valuable for society.”
Meanwhile, through an event that she hosted at Westminster Business School for social enterprise Secret Pillow Project, Dr Ruth Sacks had made a connection with UK-based crowdfunding platform Crowdfunder. Crowdfunder, who already had partnerships with Surrey and Plymouth universities were keen to develop something similar with the Business School.
Dedicated crowdfunding microsite
Ruth arranged for them to set up a dedicated crowdfunding microsite within their main website that is exclusively for the Business School’s students and staff and alumni.
“Westminster Business School and Jane have been pioneering in their approach of integrating crowdfunding into their teaching,” says Joel Hughes, Crowdfunder’s partnerships manager. “It’s not yet mainstream, so Westminster have done an exciting and innovative thing in getting involved with us so early.”
Three types of crowd-finding
There are three types of crowdfunding: rewards, equity and loans.
“Equity crowdfunding is essentially dragons’ den style,” Joel explains, “selling a portion of the business in exchange for investment. Loan crowdfunding is exactly the same as getting a loan from a bank, but instead, you’re getting a loan that’s made up literally of hundreds if not thousands of much smaller amounts from individuals.”
Crowdfunder specialises in rewards crowdfunding. “So”, says Joel, “somebody might want to set up a bakery as a social enterprise, like Luminary Bakery did. Their ethos is supporting the local community and employing women from vulnerable backgrounds.
They needed £15,000 to buy equipment, so as one of their rewards they said, if you give us £50, we will give you High Tea in our new café. They used it as a way of pretailing – pre-selling their product and service.”
Individuals, businesses and charities currently raising money on the platform offer personalised thank yous for small contributions, and discounted products and services for larger ones. Rory Sadler, an enterprising Westminster Business School student who used Crowdfunder to raise the money he needed to develop a prototype app, even persuaded his artist mother to donate paintings for him to offer as a reward!
Crowdfunding: 3 tips for a successful campaign
Joel offers three tips for running a successful crowdfunding campaign. Firstly, remember that it is a campaign.
“Plan ahead. The more time you spend planning the marketing and communications around running a crowdfunding project, the more successful you’ll be. You can’t simply put it on to the site and expect to reach your target within a matter of days. There’s a lot of work to do behind the scenes.”
A big part of this is, as Jane points out, “you have to tell a good story about what you want to do with your idea, and how it benefits society.” Particularly if you are fundraising from millennials. “This is what the new world is looking for. Something that benefits society and preserves the planet and also helps to create employment.”
“Secondly”, Joel says, “understand your audience.” But, beyond that, “you have to have an existing crowd to go to in order to reach a much wider audience in the long run.”
In other words, leverage your network. Involve friends, colleagues and, even, family as much as you can.
“And thirdly,” says Joel, “think very carefully about the monetary target that you’re looking for. The lower it can be to begin with, the more likely you are to hit that sooner and, ultimately, overfunding and raising more money that you need.”