Crowdfunding platforms are not experiencing a crisis, quite the contrary: in 2018, more than 178 platforms coexist in France, for a total amount raised approaching 340 million euros in 2017. Forecasts for the market are very positive, and should confirm a net increase in growth of around 50% in 2018, with more than 500 million euros invested.
Participatory financing is a financing method that relies on social networks via the Internet.
It allows a company to publish a project offer online and receive funds directly from individual or institutional investors.
As the market has grown, so has the range of products on offer, with different remuneration schemes for lenders. This is often a cheaper alternative to bank loans or venture capital funds.
It concerns companies of all sizes and in all business sectors (services, industry, agricultural projects, digital, high-tech, fashion, sport, e-commerce, etc.).
Here's our insight into how to develop your business projects using the advantages of participatory financing.
Participatory borrowing is very similar to conventional bank borrowing, except that funds are raised from multiple lenders (individuals or professionals). Lenders are remunerated in a variety of ways, from interest to promotions and vouchers.
To benefit from participatory financing, the project owner must submit his or her project to one of the following platforms
If the project is deemed viable, a call for funding will be published on the company's website. The project can then begin to receive funding.
In this sense, crowdfunding is also a good way to promote a project and start building up future customers, even if they don't contribute to financing your business.
Most companies wishing to use participatory financing do so when they are setting up. It is often an effective way of raising additional financing.
To ensure the success of your crowdfunding campaign, it's essential to do everything you can to convince your future investors.
On the one hand, take stock of the quality of your project's presentation, its maturity and the budget you're devoting to its communication.
Don't forget to specify the precise amount of money you need, and how the funds you raise will be allocated.
So, what are the rewards you'd like to offer your future investors? Don't forget that the success of your fund-raising campaign depends on your communication skills.
Ask your friends and family to share your offer on social networks, then invest in a targeted communications plan.
Finally, your presentation must be understandable to the general public. Be catchy and tell a story, rather than going into too much financial technical detail.
The amount of funds disbursed is growing by 50% every year on crowdfunding platforms, and will reach 500 million euros by the end of 2018!
Sharing your project en masse on social networks allows you to make it known even before it's launched, and to reach potential customers right away. You're helping to make it progressively more popular, and to build up a network of supporters, even if they don't want to invest money directly in your project.
If your project succeeds, you'll build up a real community of ambassadors.
Crowdfunding means asking the general public if they believe in your project.
If you receive a large amount of positive feedback and significant funding, then you can consider that your company has a good chance of success. If not, this could be a good opportunity to reconsider your offer or business model.
Participatory financing means that no new investor is brought into the company's capital, and your shares are not diluted.
It's also less time-consuming than bank financing or a capital increase.
Despite appearances, proposing your project on a participatory platform requires a great deal of preparation and thought to get investors on board.
Your presentation must be convincing, and the proposed remuneration attractive!
Written by our expert Paul LASBARRERES-CANDAU
October 22, 2018
