Crowdfunding is a great new way to use the power of the crowd to raise money for a variety of different projects and ventures. Crowdfunding in Nigeria is possible through sites such as Imeela.
What is Crowdfunding
Crowdfunding is the process of getting a large crowd of people to pay a small amount of money to invest in an idea or product, with the promise that when said idea comes to fruition, they will get first access to it. The idea can be anything, from an innovative piece of tech to a video game to a novelty gift. The key is engage people in your idea, be able to convince them to invest a small amount of money for a small reward, and then get them to share the project because they feel they have bought into something special and want others to know about it. The best crowdfunding projects get people talking about them and the investment follows on.
Users establish a goal, create a project, and spread the word while other users can fund a project of interest. The projects can be as fun, innovative, serious, or creative as you want them to be. It goes beyond just a monetary contribution. It allows others to actually grow with the community, business, non-profit, or individual that they’re supporting on a much more personal, connected level crowdfunding sites, which don’t require you to pay off the funds you raise.
When choosing a crowdfunding platform to raise your funds, you should consider a few facets of the service. One major consideration is if the service specializes in a specific industry or limits the reasons for funding. Another consideration should be the process to receive funds, as some services are all-or-nothing, meaning you have to raise 100% of your goal if you want to collect any money, while others allow you to keep any funds you raise, though you may pay higher fees in those cases. Below are the criteria we looked at and are features to keep in mind when selecting a service:
Many services have a specific focus for your crowdfunding campaigns. Some services focus on creative and artistic projects, some even more specifically music-related projects. One service offers a platform for scientists seeking funds for research. Other services have no limitations, so for things as various as medical bills, bucket list vacations and home improvements, you can create a campaign for any purpose of your choosing.
Crowdfunding services all work essentially the same way, though each varies slightly and may have different requirements. In general, you create a free campaign online that explains the reason you are seeking funding, your goal amount and any rewards or perks you may be offering. Depending on the way in which the specific service operates, your project stays online for a certain amount of time while donators take interest and contribute to your goal.
Fees & Receiving Funds
Every service we looked at charges a fee for providing the means of funding your campaign, which is typically around 5% of the money raised. For all-or-nothing campaigns, you will not pay a fee if you do not receive your funding. In other cases, you only pay on the percentage of funds you raise. Services also charge a payment-processing fee. Other services use direct deposit and transfer funds to your bank account.
Eight advantages of crowdfunding in Nigeria:
- it can be a fast way to raise finance with no upfront fees
- pitching a project or business through the online platform can be a valuable form of marketing and result in media attention
- sharing your idea, you can often get feedback and expert guidance on how to improve it
- it is a good way to test the public’s reaction to your product/idea – if people are keen to invest it is a good sign that the your idea could work well in the market
- investors can track your progress – this may help you to promote your brand through their networks
- ideas that may not appeal to conventional investors can often get financed more easily
- your investors can often become your most loyal customers through the financing process
- it’s an alternative finance option if you have struggled to get bank loans or traditional funding
Six disadvantages of crowdfunding in Nigeria:
- it will not necessarily be an easier process to go through compared to the more traditional ways of raising finance – not all projects that apply to crowdfunding platforms get onto them
- when you are on your chosen platform, you need to do a lot of work in building up interest before the project launches – significant resources (money and/or time) may be required
- if you don’t reach your funding target, any finance that has been pledged will usually be returned to your investors and you will receive nothing
- failed projects risk damage to the reputation of your business and people who have pledged money to you
- if you haven’t protected your business idea with a patent or copyright, someone may see it on a crowdfunding site and steal your concept
- getting the rewards or returns wrong can mean giving away too much of the business to investors