Specialist finance

A guide to crowdfunding in Australia

Crowdfunding in Australia has blown up in recent years – especially equity-based crowdfunding, which reached record levels in 2022. Not only is it possible to raise money for a business or personal project, but it's also easy to do so. However, there are still a few things you should know before diving into the world of crowdfunding. This guide will help you get started and answer any questions you may have about this new way of raising funds.

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What is crowdfunding?

Crowdfunding is a way of raising money by asking a large number of people for small donations. In Australia, it's typically done through online platforms like GoFundMe or Pozible.

The concept is simple: you produce a product or service and ask your audience to support its creation in exchange for rewards that come along with that financial backing. There are various different types of crowdfunding campaigns, but they all follow this basic structure.

How does it work?

The idea is that if lots of people donate small amounts, you'll have enough money to create your product or perform your project.

But it's not just about raising funds—it's also about getting feedback on what people want from your idea and building an audience who are interested in what you're doing.

Australian crowdfunding platforms

If you're a small business or sole trader interested in crowdfunding, here are the main crowdfunding websites operating in Australia:

  • Crowdfundingaustralia.com
  • Startmate.com
  • Kickstarter
  • Pozible
  • VentureCrowd
  • Equitise
  • Gofundme
  • Chuffed.org
  • everydayhero

Equity crowdfunding

Equity crowdfunding is a way of raising money for your business by selling shares to investors. It’s an alternative to raising capital through traditional means like venture capital, angel investors or banks, and it’s a great way to engage with a wider audience.

How to prepare for the launch of your crowdfunding campaign 

Planning your crowdfunding campaign is a crucial step in the process. Before you start a campaign, you should be ready to present your business to the world and ask for money.

1. Set a goal amount. 

Your goal is what you hope to raise by the end of the campaign time frame. If you don’t reach your goal amount, you won’t get any of the funds pledged by backers. You can set a lower initial goal to test the waters, but try to set a realistic number that will help ensure success.

2. Decide on rewards. 

Crowdfunding campaigns benefit from incentives or “rewards” for backers who donate money toward your project. These rewards can take many forms — from products you already make and sell, to special deals or offers on future products or services, and even experiences like private tours or lunches with company founders. It’s important that both you and your backers benefit from these rewards — otherwise it defeats the purpose of crowdfunding!

3. Choose your platform wisely. 

There are several platforms out there that offer different benefits for people seeking funding from others online. Each platform has different benefits depending on the type of campaign you’re running. They will usually have two types of fees: platform fees (paying to sign up), and processing fees (for the payment processing). For example, GoFundMe doesn’t have any platform fees, but it does have a payment processing fee of 2%+0.30c. Research your favourite platforms thoroughly to make sure you understand their fee structure.

4. Identify your audience and channel them through social media

Once you've got all this down pat, it's time to start reaching out to potential backers and building an audience for yourself on social media sites like Facebook, Twitter and Instagram. Make sure that any posts are engaging, fun and informative so people will want to follow along with what's going on behind the scenes while they wait for their products. You can also write blog posts about your idea or product. This will help establish yourself as an expert in the field, which makes you more credible when asking for donations or pre-orders later on. Plus, blogging is fun!

5. Promote your project before launch

Create a compelling story that showcases the benefit of what you're offering and why anyone would want it — especially if there's nothing else like it on the market right now (or ever). Create visual content that helps people understand how your product works, along with video content that shows off how it looks in action (and provides other valuable information about the product).

6. Collect email addresses from backers before launch

Create a landing page where you can collect email addresses from backers before launch of a crowdfunding campaign. This will give you time to build up an audience before launching your campaign and drive traffic directly to it when it goes live. Set up your landing page so that visitors can sign up for updates via email or RSS feed so they don't miss any announcements about when your campaign launches, how much money has been raised so far and what rewards they can expect if they back your project at different levels of support.

Collect emails from existing customers by offering special discounts or incentives for those who join before the launch date of your new product or service offering. This can be as simple as an exclusive discount code for early adopters, which encourages them to share with their friends.

Tips for crowdfunders

Before you get started, there are a few things to keep in mind.

  • Be prepared! Crowdfunding is a lot of work, and running a successful campaign requires careful planning and execution. You’ll need to be able to handle any problems that arise, from technical issues with your website or social media pages to disputes with backers about their rewards.
  • It's not just about money! Crowdfunding is not an easy way to make millions overnight; it's an opportunity for businesses and individuals alike who want their projects or personal interests supported by others who believe in those projects/ideas just as much as they do. A good way of looking at this is: "What have I got?" If the answer isn't enough then crowdfunding may not be right for them right now - but if it is then go ahead and do it!

Some things you should know about crowdfunding in Australia

The first thing is the tax treatment. If you are an Australian resident or company, then the ATO's tax rules for crowdfunding are exactly the same as for other investments. This is good news because it may mean that there are no capital gains taxes on your investment. Keep in mind that crowdfunding counts as taxable income and will need to be recorded on your tax return. However, it may be able to be deducted from your taxable income if you use it for business purposes.

Crowdfunding platforms are not financial institutions. They don't lend money and they don't guarantee that what you're offering will be successful. Some platforms may also charge fees for hosting your campaign, which can vary depending on the platform and campaign type.

Disclaimer: always refer to professional advice. The information presented here is purely indicative and not intended as advice. Always consult a legal or finance professional.

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