Financing your company through crowdfunding

WHAT IS CROWDFUNDING?

Crowdfunding or participatory financing is a financing method that allows a large number of contributors to finance a project, mainly through a web platform. In 2021, this method of financing was used to finance several hundred companies for more than 100 million euros, in Belgium alone.

There are several benefits to crowdfunding :

1. It allows funds to be raised in a low-risk way. Indeed, if the campaign does not achieve its goal, the funds are refunded to the investors.
2. It allows the concept and the interest in the project to be validated. In the case of reward-based crowdfunding, you pre-sell a product or service in order to pre-finance your activity. In the case of debt-based crowdfunding (=crowdlending) or equity crowdfunding (=crowdequity), you measure the confidence that investors have in the success of your project.
3. It allows you to promote your project further, since the campaign requires you to tell your story, create marketing content (visuals, press releases, social media content, mailing) and communicate intensively, potentially through new channels.

Which crowdfunding platforms in Belgium ?

There are currently around fifteen platforms active in Belgium. They work in different ways and have different rewards and objectives. It is therefore important to make the right choice, depending on the type of financing you are seeking and your sector. Here is a non-exhaustive list:

• BeeBonds
• Bolero
• Crowdin
• Ecco Nova
• Growfunding
• Gingo
• Kickstarter
• KissKissBankBank
• Lita.co
• Look&Fin
• Miimosa
• Ulule
• So Crowd
• Spreds
• WinWinner

What are the different types of crowdfunding?

Crowdfunding can take 4 different forms:

1. Crowdfunding by donation

Contributors make a donation to support your project and receive nothing in return. This is the case on platforms such as Crowdin, Growfunding, Kickstarter, KissKissBankBank, Miimosa and Ulule.

2. Reward-based crowdfunding

In this format, the contributor receives a reward in kind, this usually takes the form of your products or services but it can also be an invitation to your launch, the contributor's name displayed on site, etc. This type of crowdfunding is found on platforms such as Crowdin, Growfunding, Kickstarter, KissKissBankBank, Miimosa and Ulule.

3. Debt-based crowdfunding / convertible loan crowdfunding

The contributors grant you a loan, which you are then obliged to repay according to the defined duration and interest rate. This type of crowdfunding represents 70% of participatory funding and interest rates are generally between 3% and 10% depending on the platform. In 2021, more than 200 Belgian companies borrowed 85 million euros from Belgian individuals using this method. The convertible loan initially works like a conventional loan, providing cash on the one hand and distributing interest to the contributors on the other, but it also allows the contributors to join the company's shareholding (often at a reduced price) and to transform the company's debt into equity. This type of crowdfunding can be found on platforms such as BeeBonds, Bolero, Ecco Nova, Lita.Co, Look&Fin, Miimosa, Spreds, SoCrowd and WinWinner.

4. Equity crowdfunding

The contributors finance the project and become shareholders in the company. As such, they may one day receive dividends or resell their shares. This solution is often used as a complementary solution to the contribution of shareholders' equity and business angels and can increase the project's equity, demonstrate the public's interest and show the presence of a market. This type of crowdfunding can be found on platforms such as Lita.Co, Spreds and SoCrowd.

How does crowdfunding work?

Although each platform has its own particularities, the process is generally as follows:

• You present your project and your needs to the platform of your choice 
• (optional) The platform's managers analyse your project and check that it meets their criteria
• (optional) The platform's managers help you to create your campaign (visuals, messages, proposed compensation, etc.)
• The selected projects are presented to the public through the platform, usually as a campaign and you activate the associated communication plan
• Potential contributors who are attracted by your project finance it at the desired level, taking into account the precise terms and conditions linked to the platform and the selected project
• If you reach your objectives, the funds are generally released to you within a few weeks (minus the platform's possible commission, the cost of communication and the compensation)

Five tips for a successful crowdfunding campaign

• Define the amount you are looking for taking into account the platform's fees and any commission, communication costs (creation of a video, advertising on social networks, etc.) as well as the cost of any rewards.

• Choose the right type of crowdfunding (depending on your company's structure, your maturity, the amount you are looking for) and the right platform (depending on your sector, desired geographical scope, the platform's target audience, etc.). Browse the platforms to spot projects similar to yours.

• Create an attractive value proposition. For reward-based crowdfunding, think about your target contributors and be creative in your proposal, with rewards for different profiles and desires. If you are proposing a debt-based contribution, make sure of your ability to repay and make the investment in your project rewarding from a non-financial perspective as well (encouraging individual values, supporting an entrepreneurial profile and its history, the economic or local impact of your project, etc.). 

• Remember that your crowdfunding campaign is a communication exercise. Its preparation varies between 2 to 6 months and requires the creation of marketing content (visuals, video, messages) as well as a comprehensive communication plan including your different targets and channels as well as the content to make them contributors. Mobilise your friends and family from the beginning, they are often the ones who invest the most and they can help to showcase your campaign on the platform. Also, reach out to the media (radio, print) and some relevant influencers to reach potential contributors outside your network. Continue to excite throughout your campaign, sharing updates on its progress, even beyond the defined objective with for example "If 200% of the goal is reached, we will be able to fund..... "

• Keep in touch with your contributors once the campaign is over. Thank them, deliver their rewards in a reasonable time and keep them informed of your progress, they are potential customers and generally good ambassadors!