Crowdfunding during a crisis: market report and advice on raising finance under uncertain conditions

During a financial crisis, many companies decide against starting crowdfunding campaigns because they don’t believe in their efficiency. The reality is absolutely different: crowdfunding campaigns are a lifeline for those whose lives have been overturned by the crisis! It’s an effective method for raising investments that remains relevant and functional at all times. The key is to correctly set up your campaign, considering the current situation on the market.

Current market situation and its effect on crowdfunding platforms 

It comes as no surprise that the largest factor affecting the current market is the COVID-19 pandemic. It has incited a crisis in many industries, forcing entrepreneurs to seek out alternative sources of financing. Crowdfunding is one such source.

Due to declining finances, many people were forced to give up on risky investments. This had a strong impact on crowdlending platforms, where physical entities can provide companies or individuals with loans to get back their investments with interest. The deal occurs without intermediaries such as banks or other official institutions, so investors practically don’t have any guarantees that they will get their funds back. These conditions are seen in a particularly negative light during a crisis, and some crowdlending platforms have even ceased operations. Others have decided to compromise, toughening conditions for campaign organizers to increase the chances that investors will get their funds back.

The crisis has had a smaller impact on the operation of crowdfunding platforms, where donors get rewards from founders for their donations, or simply make donations to charities. Thus, the number of launched campaigns on the major Russian platform Planeta.ru have increased from 373 to 425, while the number of transactions have increased by 20%.

During quarantine, people had more time to review crowdfunding projects, increasing their financial literacy. However, the amount of funds that people are prepared to spend on a stranger’s business has dramatically dropped: for instance, the average check on Planeta.ru was once 1300 rubles, and now it does not exceed 1100 rubles.

One thing worth remembering is that both the pandemic and the crisis will be over at some point. In the meantime, brands can use crowdfunding to increase the number of their clients and create a reputation on the market. For companies to be able to successfully raise funding and attract new customers, it’s important to launch your crowdfunding campaign while considering the current situation on the market.

How to attract funding during uncertain times? 

The attention of potential clients is an extremely valuable resource for any company. Due to the quarantine, people now have more free time, which they can spend on studying information about products that interest them. That’s why this is the best time to launch your crowdfunding campaign! Don’t waste your time. Here are some tips that will help you complete your crowdfunding campaign in much less time.

Tip 1. Don’t set unachievable financial goals 

The average donation on most platforms has gone down, so don’t expect to raise astronomically high funding amounts. The best strategy is to aim for the average funding goal which will cover your expenses on implementing your idea, but make sure it’s realistic. Unachievable goals scare off potential donors, and your goal should be to attract as many donors as possible.

Tip 2. Offer rewards that are interesting to people right now 

When choosing rewards for sponsors, don’t just consider your product, but also the current situation. For example, you can turn the COVID-19 pandemic to your benefit. To help fight against coronavirus, you don’t have to be a doctor or a scientist developing a vaccine. Consider offering rewards like designer masks, a translation of important foreign articles about the virus, a new type of antiseptic, and so on. It’s best to offer digital rewards, as delivery to other countries may be limited due to the pandemic.

Tip 3. Offer certificates

Consider the option of offering certificates for use in your store as a reward. If the price of the certificate is lower than its value, you will be able to attract new customers at the stage of promotion and project implementation.

Tip 4. Find partners

Collaborative projects with partners can help you expand your audience and bring attention to your project. To find the right partner, you have to be aware which influencers and businesspeople would bring value to your project, and which ones would gain value from the collaboration, in equal measure. For crowdfunding, just like any other business, it’s crucial to establish win-win relationships between partners. This means that both parties must gain something.

A promising opportunity that not all founders are prepared to consider is a collaboration with local authorities. This partnership is especially effective for social and charity projects.

Tip 5. Don’t rush your launch

Good planning is crucial to successfully complete your crowdfunding campaign (especially during a crisis!). If the circumstances aren’t favourable for you and your new campaign, don’t take that risk. It’s better to delay the launch of your campaign and adjust your plan. You must be firmly confident not only in your idea, but also in your ability to implement it. 

For founders, a financial crisis always offers new opportunities. Donors are at their most active right now, because they have enough time to review crowdfunding projects. But remember: to achieve crowdfunding success, make sure to adapt your campaign to the current situation.

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