The Founder Series: CF 101 — Pt 2— Crowdfunding Model

By November 16, 2016Industry Insider

Crowdfooding is proud to feature a series written by our Founder, Alessio D’Antino, introducing the basics of crowdfunding. This five-part series will highlight the drivers behind the majors decisions to be made in planning your first crowdfunding campaign.

In part 2 of the series, we dive into the how we can mix reward and equity crowdfunding to optimize your own model.

Deciding between the two crowdfunding types can be difficult. So why not make the best of both worlds and combine the two? Crowdfooding allows teams to do just that. This is particularly in specific cases where entrepreneurs want to cater their fundraising to both backers and investors. This helps to simplify their cap table, lowering the number of investors to those with the right incentives.

Making use of a combined model allows startups to reap the benefits of each type, engaging and validating with customers through reward-based funding while defining their own terms for equity funding, including how much money must be pledged in order to own shares of the business.

Since there is an innate funding target cap with reward funding, founders can unlock higher amounts of funding with the right audiences, passionate individuals or organizations with a shared care in the startup’s cause. This is particularly relevant within the UK investing scape where tax incentives have led to apathetic investors whose only interests are short term tax benefits. The right investors often bring about added value such as mentorship and networks that have potentially more impact than the funds themselves.

Think back to our beehive analogy — startups build up the foundation of their campaign on reward backers and leverage the strength to attract the equity investors they want for the terms they defined.

Our startups approach their campaigns with a balanced mix in mind and end their campaigns with real world business validation in the most real sense — the market response of who provides their funding.

To learn how to optimize your particular mix, Part 3 of CF101 will dig deeper into the definitions between the parties involved in the ecosystem.

Check out Alessio’s medium account for more thoughts on food business and crowdfunding in London.

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