Welcome > Blog > Blog Posts > Crowdfunding: as easy as 1: 2 : 3
16th May, 2016
As Cavendish Enterprise prepares to launch ‘Cavendish Crowd’ – our own crowdfunding platform – it seems an appropriate time to ask “exactly what is crowdfunding?” “How does it work?” And, more importantly, “how can it help start up and growing businesses?”
Briefly put, ‘Crowdfunding is the practice of funding a project or venture by raising money from a large number of people who each contribute a relatively small amount, typically via the Internet.’ (Oxford English Dictionary)
Crowdfunding is a way to raise money, awareness and support for a project, from the people around you. It’s a means of funding that allows individuals to make their ideas a reality with the ‘power of the crowd’. It enables people with great ideas to raise the money they need.
The word ‘crowdfunding’ is relatively new to the dictionary, having been added in the Summer of 2015, but the practice of crowdfunding goes way back.
The publication of books has been the subject of crowdfunded activities for centuries: a book would be written and published if there were sufficient people subscribing to buy the book once it was out. In the 19th and 20th centuries the cooperative movement generated groups who pooled together to raise the funds. In 1885 the US government failed to provide the money required to build a base for the Statue of Liberty. A newspaper-led campaign came to the rescue and attracted sufficient small donations from 160,000 donors to fund the building work.
The first practice of Crowdfunding, as we know it today was in 1997, when fans (by way of a fan-based Internet campaign) raised US$60,000 in donations to fund an entire tour of the USA for the British rock group Marillion.
So to answer, in a nutshell, the initial questions set out above:
Crowdfunding is an alternative form of finance – a form of finance that can be used to raise start up and development funds for new and growing businesses alike.
If you have an idea or a concept that people like and can see as having great potential, they are likely to invest. With the imminent launch of the Cavendish Crowd platform, start up and growing businesses across the country will be able to use the dedicated business platform to showcase and promote their ideas and get the funds rolling in.
The Cavendish Crowd platform will have three distinct types of fund raising:
Offering a ‘reward’ in return for funding is a great way to get your idea up and running.
Reward-based crowdfunding has been used for a wide range of purposes, including motion picture promotion, free software development, inventions development, scientific research, and civic projects.
Projects come in all sorts of shapes and sizes and you could be looking to raise anything from a couple of hundred pounds, to tens of thousands of pounds for a wide range of different things. For example, Seaweed & Co offers a sample of their product in exchange for funding.
Rewarding like-minded people is the most effective way to
Test and validate your idea
Pre-sell your products
Build loyalty with new customers
Market your ideas
And by getting monetary support through crowdfunding you are proving your idea to be of interest to your audience, and this in turn could provoke interest from more traditional funders to give you backing.
Equity crowdfunding is the collective effort of individuals to support new ideas and products by providing finance in return for equity, or shares in your company. Selling equity in your start-ups or growing business could take your organisation to the next level by inviting people to become investors.
It’s perfect for all types of start-up, early stage and growth businesses and Cavendish Crowd in partnership with Crowdfunder works to help businesses raise an equity stake by harnessing the power of ‘the crowd’, regulated by the Financial Conduct Authority (FCA).
3 Community Shares
It has been proven time and time again that communities are stronger when they own the things that matter most to them, and community shares have already been used to support pubs, shops, football clubs, heritage buildings, farms, woodlands, etc.
Community Shares are a great way to raise essential funding by offering people the chance to own shares in something they passionately care about.
Unlike regular shares, Community Shares are about more than just profit as investors will become active and vocal supporters of your project, and will share your vision of community enterprise, each getting a vote in how it’s run. Investors may receive a small return following any financial success of the project, but the importance is that it is wholly owned by the community it serves.
The Cavendish Crowd platform operates closely with The Community Shares Company, who alongside us will work with your organisation every step of the way, freeing you up to engage your community.
Follow us on Twitter to ensure you’re the first to hear once the platform is launched #CavCrowd
Written by Davina Young, Marketing Manager, Cavendish Enterprise
Has crowdfunding helped your business raise finance? Tell us about your experience.
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