Is Crowdfunding Right For My Social Enterprise?

Congratulations. You’ve decided to take matters into your own hands and form a social enterprise. You saw a problem and you have enough insight and tenacity to make an attempt at a solution. Creating a company that works for the betterment of humanity is a noble cause and no small feat. You have the idea, you believe in it, and now you need the funds to bring it to life. And here is where the trouble truly lies – What is the best way to financially back your social enterprise? 

Previously, most individuals pursuing to start a company, where immediately drawn to the traditional financial methods of funding – bank loans, grants, venture capitalists and if lucky enough, an angel investor. But more and more, through multiple platforms, crowdfunding has become a viable option for those looking to fund their social enterprises.

Crowdfunding began as a way for people to finance businesses and projects they believed in. This naturally took the form of social businesses, all united by the prospect of using the power of business to create social change, and it can have great advantages.

To start, crowdfunding taps into the people who also care about the problem you are looking to solve, meaning that patrons will be more willing to give to your business because the message already resonates with them. With a social enterprise, it is almost certain that you have a ready-made audience bought in to your proposition, and all you must do is find them.  When crowdfunding, you are also able to retain complete control your business. You will not have to give up any stakes and run it as you see fit, since the funds are fully donated to your cause. Overall, when you choose to crowdfund, you don’t have to compromise your business or your social vision to third parties.

The amount of people pledging to your cause can give you an idea of how much impact your venture will have on the problem you’re looking to tackle, and of how important it is to others, which can be very useful if later on you make the decision to approach investors. It can also provide a general sense of how the market feels about and responds to your business and the cause it addresses.

As you tirelessly market your crowdfunding campaign, you’re not just getting word of your business out, you’re also informing the public, lending publicity to your cause, meaning that you’re making a difference from the start.

There are also the very real downsides of crowdfunding for your social enterprise. If the target amount of your campaign is not reached, potential investors will get their money back and the business you are working to create goes away empty handed with no funding. This can be damaging to the image and reputation of the business, causing future investors to hesitate in investing in your vision.  

Crowdfunding is also heavily reliant on a strong, established existing network. This is vital to the success of a campaign, as your network will be your initial backer and the first point of dissemination of the message. Without it, even the best ideas may not get funded. Consider this as one of the main points before crowdfunding. UpEffect helps you build this network in the pre-launch stage, which not all platforms can provide. 

Unlike traditional methods of raising finance, where there are a few potential investors to whom you would present your idea, crowdfunding involves many people knowing a lot about the business, what and also how it aims to accomplish. This is an unwelcome side effect of crowdfunding, in that it gives other businesses the opportunity to copy ideas before you, the originator of the idea, have seen it through to fruition.

It is therefore imperative that you as a business, get the correct intellectual property protection for your ideas before engaging in a very public online campaign. This can take the form of trademarks, patents or copyrights. Businesses with good ideas must read the legal disclosure on their chosen crowdfunding platform and get good legal advice before making a product or innovative idea public. As experts in social enterprise and business, our team will make sure you don’t go astray. Another reason why finding the right crowdfunding partner is so crucial to success.

Unfortunately, crowdfunding is not immune to fraud. Fake sites have emerged across the internet promoting projects, particularly in the charitable sector and social enterprise market, that are simply being copied from legitimate platforms with the purpose of diverting funds to fraudsters. So it is important that if you do decide to take the crowdfunding route, you must always check the credibility of the crowdfunding platform you are hoping to use before committing.

When deciding if crowdfunding is the correct path for your social enterprise, start of by researching the many other sources of finance that are available to small businesses. Don’t decide to raise money through crowdfunding because you think that’s what everyone is doing these days and that it works for everyone. The reality is that there are lots of options for accessing funds, of which crowdfunding is one. Ruling out all other options before seriously considering them could result in you spending more time and money on getting the money than you needed to.

At UpEffect, it is our goal to help you make the most impact with your enterprise. We provide a free consultation call to address if you are ready for a successful crowdfunding campaign.  

With that being said, crowdfunding has worked for so many businesses not just because they had a good product, idea or campaign, but because they knew to align their social enterprise with the correct platform and were looking to build more than a startup. So don’t relegate your due diligence when deciding if you should crowdfund.

And once you do decide that it is the best option for your social enterprise, take two minutes to fill out this form and an UpEffect team member will be in touch shortly to help you fund your business and take your impact to the next level.

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