It is an undeniable fact that crowdfunding is one of the most efficient methods of fundraising. While traditional fundraising still seems to be prevalent in India, one can look for other options such as crowdfunding, which is less time-consuming and affordable. Crowdfunding can be of many types; this post mainly focuses on reward-based crowdfunding.
What Is Crowdfunding?
Crowdfunding is a fantastic practice used to raise funds from individuals to support your cause. Modern day crowdfunding seems easy, thanks to platforms like Milaap. One can put up their campaign within seconds and expect to get funded. Crowdfunding India using Milaap.Crowdfunding India using Milaap.
Types Of Crowdfunding
Just like many types of fundraising, there are many types of crowdfunding as well.
- Reward-based crowdfunding
Let's jump directly to reward-based crowdfunding, as that's our main focus for today.
What Is Reward-based Crowdfunding And How Does It Really Work?
In reward-based crowdfunding, the donors who believe and donate to the cause are given a small reward in exchange for their contribution towards the cause. It can either be the copy of the artist's new album.etc
It can even be a watch, or a film as well. As most of the reward-based crowdfunding campaigns are run by individual artists, musicians, and film producers. Startups can also leverage this type of crowdfunding. Indiegogo and Kickstarter are two examples of good crowdfunding sites for reward-based crowdfunding. People who opt for this type of crowdfunding aren't usually qualified to get loans from banks. Hence, crowdfunding becomes their only option to raise funds for their project.
What happens In Reward-based Crowdfunding?
Reward-based crowdfunding might sound exciting and lucrative to the donors as they're getting something out of it. While most of the donors will donate solely believing the cause, others see the gifts that they're getting from it.Read more on: How you can use crowdfunding for charity
Rewards can be divided into three categories depending on the amount of money an individual donates. It is used to distinguish between people who contribute small amounts and those who are generous.
The Three Categories Of Reward-based Crowdfunding
Pre-orders: It is one of the most effective ways of giving out rewards. The campaigner, if he's a musician, can put up his album for pre-orders especially to the donors. It provides them early access to your work. This is why many video game makers choose to crowdfund their game, as in this way, people start evaluating the game, and it can give you more ideas to work upon, tailoring the game and making it suitable to people's needs.
Services: If your project doesn't fit for giving out pre-orders, then you can provide special services to the donors. Famous examples in the past include the campaigner making a meal for all the backers or developers offering to write code.
Recognition: This is a perfect entry level gift you can provide to your patrons. Backers who are backing the project by paying less than 1000 rupees, can get their name displayed on the campaigner's website, thanking them for their contribution. They can even be provided gifts like company's t-shirt related to the campaign.
Anyone who's running a reward-based crowdfunding campaign must have different kinds of rewards suitable to the donors falling under specific categories, solely depending on the amount of contribution that they make. This will differentiate between small donors and generous backers.
This type of crowdfunding works well in the case of B2C (business to consumer) ideas but not with the B2B (business to business) model.
Innovative startups can use reward crowdfunding when they want exposure for their brand and the product. Popular smartphone companies like Nextbit has launched their devices using reward crowdfunding.
Choose a mode that suits your cause and begins your crowdfunding journey.