June 7, 2022
How Crowdfunding Works for Startups
Table of contents
Key Features to Look for in an
Investment App for Beginners in the UK
Investment App for Beginners in the UK
Introduction
Discover fundraising tips from Team Strabo
Introduction
If you're a startup or small business, you may be wondering how crowdfunding works for startups. This article will explain everything you need to know about how crowdfunding can help your business raise money and grow. We'll cover topics such as how to create a successful crowdfunding campaign, the different types of crowdfunding platforms, and what to expect once your campaign is funded. So whether you're just starting out or you've been in business for a while, read on for all the information you need about how crowdfunding works for startups and how it might help you!
How Crowdfunding works for Startups: What is it?
So what is crowdfunding? In short, crowdfunding is a way for startups and small businesses to raise money by soliciting donations or investments from a large group of people. This can be done through online platforms such as Seedrs or Crowdcube, or through more traditional methods such as angel investors or venture capitalists. In fact, the two often work in tandem together. The process involves listing your company on a crowdfunding platform, where the public can make investments as small as a few pounds in return for a small piece of equity in your company. A successful campaign will end up with lots of different investors who have all clubbed together for one "chunk" that is split between them.
The benefits of crowdfunding for startups
There are a number of benefits that come with crowdfunding for startups. Firstly, it's a great way to get your business off the ground without having to go through traditional channels such as banks or venture capitalists. That being said, you will have to collect at least a few big ticket investors to close a campaign, so be wary of this. Secondly and more importantly, crowdfunding is a great way to build buzz and excitement around your product or service. This can help you attract more customers and grow your business in the long run. It's particularly helpful for direct to consumer businesses, where the public who see the campaign will likely be your target market. You'll also build up a healthy number of advocates who are, quite literally, invested in your product.
One added benefit is that it gives you further opportunity to put your product in front of users in a controlled environment and iron out any flaws that you might have missed. With a few thousand people seeing an early version, the critique can be direct and sometimes cutting, so a thick skin is required!
A successful crowdfunding campaign is often seen as the ultimate customer validation of your idea but we’re talking equity here, so in return your customer becomes an owner and will do everything they can to see your business grow and succeed.
The different types of crowdfunding platforms
Now that you know how crowdfunding works for startups and how to create a successful campaign, let's take a look at the different types of platforms available.
The two most popular types of crowdfunding platforms are equity-based and reward-based.
- Equity Based platforms allow businesses to raise money by selling shares in their company. This is a great option for businesses that are looking to grow quickly and attract a lot of attention from investors. This is generally the more relevant option for startups who don't have the time or money to engage in drawn out marketing campaigns and don't yet have a product to offer investors. The premier examples are Seedrs and Crowdcube.
- Reward Based platforms, on the other hand, allow businesses to raise money by offering rewards to donors. This can be anything from a discount on your product or service to an exclusive behind-the-scenes look at your business. Startups also often operate a SaaS (Software as a Service) monthly subscription model, which makes it harder to offer significant rewards for this type of raise.
No matter which type of platform you choose, it's important to make sure you do your research and pick one that's right for your business. Using the right platform is one of the most important parts of how crowdfunding works for startups. Reach out to them and jump on a call! We found Seedrs to be the best fit for our crowdfund and would use them again in an instant.
How to create a successful crowdfunding campaign:
So how do you go about setting up a successful crowdfunding campaign?
Now that we've covered the basics of how crowdfunding works for startups, let's take a look at how to create a successful campaign. There are a few key things you'll need to do in order to make your campaign attractive to potential donors or investors.
First, you'll need to have a clear and concise pitch for your product or service. This should explain what your business does and why it's worth investing in. You'll also need to set a realistic funding goal. Keep in mind that most crowdfunding platforms will only release the funds if you reach your goal, so make sure it's something you can realistically achieve. The best way to do this is through comparables of other early stage businesses in your sector, revenue projections and macroeconomic market conditions.
Next, you'll need to create a campaign video.This is one of the most important parts of your campaign, as it's your chance to really sell your product or service. Make sure your video is high quality and explains what your business does in an engaging way. It's often useful to hire actors (this can be done cheaply, it doesn't have to be Hollywood!) so that people can see a little segment of your product being used. This can be done externally or with the help of an online video editor.
Often people ask if they need a separate agency to help them with the process. From our experience, this isn't actually necessary: the platforms have dedicated people to help you through every stage of the campaign, and we found with Seedrs that the material / templates / answers they provide are incredibly detailed.
Then, you'll need to build up a social media following for your campaign. This can be done by creating content that is shareable and by using hashtags to get your campaign in front of potential donors or investors. You'll need to engage in a lot of direct outreach to make sure that there is momentum. One of the lesser known parts of how crowdfunding works for startups is that you'll need to make sure you have enough commitments by the time you want to go live, that you have a reasonable level of certainty that you will close the round. By the time the campaign reaches the public, you want to have plenty committed, so that they can jump on the bandwagon rather than push start it! It's in doing this that Strabo managed to hit our target just 2 days after going public.
Finally, after going public you'll have to spend a significant amount of time speaking and engaging with investors. People will have all types of questions, and you'll have to be on hand to answer them quickly to strike while the iron is hot.
What to expect once your campaign is funded
Once you've successfully raised money through crowdfunding (congrats!), it's important to set expectations for how you will use the funds. This is one of the smaller aspects of how crowdfunding works for startups, but no less important. Be transparent about how you plan on using the money and how it will help your business grow. Additionally, make sure you keep your donors or investors updated on your progress and how their money is being used.
You will have had to submit a planned use of funds as part of your campaign, and investors will start to ask questions if this isn't being stuck to. It also compromises your ability to forecast for the future, and raise a future round.
If you are pre-launch, as Strabo was, you will also have to reallocate resources towards your impending launch and redirect all this new momentum towards that!
You will likely also have a list of investor perks that will have been promised to those who made investments of various sizes, so don't forget that these will have to be fulfilled.
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Additional resources for entrepreneurs looking to crowdfund their business
As mentioned, the number one source of truth for this should be the platforms themselves. They have experience running thousands of campaigns, and they won't make a single penny unless your campaign is successful. So it's in their interest to make sure you're ready before going live, and you have everything you need.
We found SeedLegals to also be useful to get the necessary documents in place for the round, although this was more useful when having external investors participate who needed to be reconciled with the crowdfund. Key materials like a pitch deck should also be on hand and available for investors, and can be crafted with the help of pitch deck consultants.
SeedLegals and Hubspot also have lengthy blogs where they go into further details on some of the best platforms and tactics to use. Finally, go and speak to someone who has crowdfunded for their company! No better way of figuring out what it's like or whether it's right for you. It is no small undertaking, so be aware of the work that will be required.
Conclusion
And there it is! How crowdfunding works for startups! Having launched a successful crowdfunding campaign to complete our first fundraising round, we have some experience in this area, and wanted to put together a brief guide.
Why Use Investing Apps in the UK
The UK has seen a boom in investing apps in recent years, which offer beginner investors an easy to use and accessible option to get into the market.
Investing is now simpler than ever thanks to these applications, which get rid of the need for pricy brokers or complicated procedures. Investing apps like Trading 212, Freetrade, and Revolut make it possible for young and beginner investors to take control of their investments with their user friendly interfaces, built in educational tools and minimal or no costs.
As the need for low cost investing options and financial independence continues to grow, the UK is expected to utilise mobile investing tools even more in 2025. More people in the UK are using apps to manage their money as a result of its adaptability, simplicity of use, and the growing trend towards digital financial solutions and increased awareness of personal financial planning, which makes investing apps an effective tool for beginner investors.
Investing is now simpler than ever thanks to these applications, which get rid of the need for pricy brokers or complicated procedures. Investing apps like Trading 212, Freetrade, and Revolut make it possible for young and beginner investors to take control of their investments with their user friendly interfaces, built in educational tools and minimal or no costs.
As the need for low cost investing options and financial independence continues to grow, the UK is expected to utilise mobile investing tools even more in 2025. More people in the UK are using apps to manage their money as a result of its adaptability, simplicity of use, and the growing trend towards digital financial solutions and increased awareness of personal financial planning, which makes investing apps an effective tool for beginner investors.
Benefits of Using Investing Apps for Beginners
There are a number of advantages to using investing apps for beginners, particularly for those who are just getting started. Here are a few main benefits:
- Accessibility - By providing a straightforward, mobile friendly platform that is available at anytime and from any location, investing apps have completely changed how individuals invest. You no longer have to spend hours learning complicated systems or setting up sessions with financial experts. Beginners can begin investing directly from their smartphones with a few taps. Anyone, regardless of their schedule or location, can participate in investing without any obstacles thanks to this immediate access.
- Low cost - The affordability of investment apps is one of their most notable benefits. The high commissions and administration costs associated with traditional broking services make it challenging for those starting out to invest small amounts of money. On the other hand, a lot of investment apps provide cheap fees or commission free trading, which makes them perfect for beginners. This enables beginners to invest without fear of losing a significant amount of their profits to fees, allowing them to give more money to the market.
- Adaptability - Traditional investment strategies are not as flexible as investing apps. Beginners can more easily dabble without making a significant upfront payment because many investment platforms enable users to invest in a variety of assets, stocks and shares, exchange traded funds (ETFs), and specialised investment options, allowing beginners in the UK to diversify their investment portfolios right away. Furthermore, everyday investors may manage their investments on their own terms and are not restricted to a 9 to 5 schedule thanks to the option to trade at any time and from any location.
Investment apps are a great place for beginner investors to start because they combine low-cost solutions, user friendliness, and convenience to help gradually increase wealth.
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Key Features to Look for in an Investment App for Beginners in the UK
It's crucial to search for features that can features that can facilitate your learning and make investing simple and accessible when selecting an investment app as a beginner. Here are some essential features to look out for:
- East to use interface
The design of the app should be simple and intuitive. You will find it easier to comprehend and utilise the platform without feeling overwhelmed if it has a straightforward and uncomplicated layout. - Educational Resources
The best investment apps include educational materials such as FAQs, videos, tutorials, and articles. Beginner investors can use as a guide to understand important investment strategies and make wise choices. - Platform fees
A lot of investment apps charge management fees and trading fees. To protect your investment gains, it's crucial for beginners to select an investment app with little to no costs. The best investment apps waive management fees or provide zero commission trading. - Low minimum investment
For beginners who might not have a large initial investment, apps that let you start investing with small amounts of money are excellent. Also look for apps that sell fractional shares, so you can invest in pricey stocks without having to purchase the entire share. - Portfolio diversification tools
Seek for investment apps that provide a variety of investment options, including mutual funds, index funds, and exchange traded funds (ETFs). Even with little money you can create a diversified portfolio by making a fractional investment in individual stocks. - Robo-Advisor Features
Some investment apps include robo-advisors which automatically manage your investment portfolio according to your goals and risk tolerance. For those whose may not feel comfortable choosing their own investments, this is a fantastic benefit. - Security features
It is important to ensure that the app has strong security features like encryption, two-factor authentication, and safe account recovery methods to protect personal data and information. - Current market data
The best investment apps have real time market data, charts and stock market performance metrics which are essential for beginners who wish to remain informed and make wise judgements. - Type of investment accounts
There are many types of investment accounts available, such as investment accounts for minors, individual retirement accounts and individual taxable accounts. You should choose an investment app that provides you with a range of account options that can help meet your financial objectives.
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