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Crowdfunding, raising small amounts of money from multiple people, has become more popular every year since its inception. Individuals and business use this financing practice.

SCORE’s latest infographic, sponsored by Nav, details the trends of crowdfunding for small businesses and whether this financing method could work your company.

In the US, crowdfunding has raised more money every year…and the amount is projected to grow.

• 2016: $800 million
• 2017: $915 million
• 2018: $1.04 billion
• 2019: $1.17 billion
• 2020: $1.3 billion

What crowdfunding options are available for your business?

• Reward-based:

  • Backers receive early version of product or other rewards (Ex. Kickstarter, Indiegogo)
  • Maximum funding amount: none
  • Typical cost: 8%-10% in fees

• Equity:

  • Individuals invest in return for company share
  • Maximum funding amount: Up to $1.07 Million
  • Typical cost: 3%-6% in fees, plus $10K-$100K in professional fees

• Debt:

  • Backers provide loans in exchange for interest
  • Maximum funding amount: Up to $500K
  • Typical cost: 5%-27%

Campaign success rates and amount raised vary by category

• Design: 36% are successful
• Fashion: 25.8%
• Food: 24.8%
• Technology: 19.9%

Tips for crowdfunding success:

• Prepare
  • Research similar campaigns
  • Choose the best platform and funding goal
• Pitch
  • Share your unique story
  • Create engaging photos and video
• Promote
  • Use your networks: family, friends, community and social media
  • Update your backers frequently

After the campaign, crowdfunding success creates more benefits:

• Strong customer base
• Greater publicity
• Higher likelihood of external financing
• Increased chances of business partnerships