Growth
How Startups Can Use Crowdfunding to Raise Capital and Build a Community
Written by
Lineke Kruisinga
Published on
September 18, 2025
Written by
Published on
Crowdfunding has changed the way startups raise money. Instead of relying only on banks or venture capital firms, founders can now bring their ideas to the public and invite early supporters to fund them. For many startups this is more than just financing. It is a way to test demand, build a first community of loyal customers, and gain visibility before launching on a bigger scale. In this article you will learn how crowdfunding works, the different types to choose from, and what it takes to run a successful campaign.
Crowdfunding is a way for startups to raise money by asking many people to contribute small amounts through online platforms. Instead of pitching only to banks or investors, you share your idea directly with the public. This makes it easier to get early support and test whether people are really interested in what you are building.
The unique thing about crowdfunding is that it is not only about raising capital. A campaign also helps you build your first customer base and create attention around your product before it officially launches. In many ways it is fundraising, market validation and marketing all at once.
Campaign Creation
The process starts with creating a campaign page on a platform such as Kickstarter or Indiegogo. Here you explain your idea, what problem you are solving, and how much funding you need. Clear storytelling and visuals play a big role in convincing people to back your project.
Funding Period
Most campaigns run between 30 and 60 days. Shorter campaigns of around 30 to 35 days are common for gadgets and consumer products, while more complex or higher priced products often need 40 to 45 days to gain credibility. Campaigns of up to 60 days are sometimes used when the main focus is on driving as many sales as possible.
Rewards and Incentives
In reward-based crowdfunding, backers receive something in return for their support. This can be early access to your product, special editions, or other perks. These rewards make people feel part of your journey and turn them into your first group of loyal customers.
Funding Models
There are two main models. In an all or nothing model you only receive the funds if you hit your target. In a flexible model you keep whatever amount you raise, even if you do not reach your goal. Both approaches have pros and cons depending on your financial needs and risk.
Why Startups Use Crowdfunding
For founders, crowdfunding offers more than access to capital. It helps prove that your product has demand in the market, something investors look for in later stages. It also gives you a group of early adopters who are excited about your idea and can become long-term advocates for your brand. On top of that, a strong campaign often attracts media attention and builds momentum for your next steps.
Not every crowdfunding model works for every startup. Some are better if you want to pre-sell your product, while others make more sense when you need larger investments. Below are the main types of crowdfunding and how they can support your business.
Reward-based crowdfunding is one of the most common models for startups. It allows you to pre-sell your product before it is even on the market. Backers pledge money in exchange for a reward, which is usually your product or a special edition of it.
This type of crowdfunding is especially useful if you are launching a physical product, a creative project, or a new tech gadget. It gives you the chance to build a customer base of early adopters while keeping full ownership of your company.
Campaigns usually run between 30 and 60 days, often on platforms like Kickstarter and Indiegogo. Many founders choose an all or nothing model here, which means you only receive the funds if you reach your target. This creates urgency and encourages backers to help push the campaign forward.
Equity crowdfunding is designed for startups that want to raise larger amounts of money. Instead of offering rewards, you give backers shares in your company. This makes it similar to raising capital from venture investors, but the amounts per investor are smaller and spread across many people.
Equity crowdfunding can be a good option if you are preparing for growth and need more than just product validation. It is also more regulated since you are offering securities. Platforms like Seedrs or Crowdcube, take care of much of the compliance, which makes the process easier for founders.
Also known as peer to peer lending, this model works like a loan. Instead of borrowing money from a bank, you borrow from a group of individual lenders who each contribute a part of the loan amount. You then pay them back with interest over an agreed period.
This option is best for businesses with predictable cash flow that can handle regular repayments. Platforms such as Funding Circle or LendingClub often manage the credit checks, repayment schedules, and payment processing, which reduces the risk for lenders and helps you focus on your business.
Donation-based crowdfunding is mostly used by charities or projects with a social mission. People contribute because they believe in the cause, not because they expect a return. While this model is not as common for startups, it can be relevant if your company is strongly impact-driven.
Platforms like GoFundMe or JustGiving are well known in this space. They allow campaigns to run for longer periods and often accept donations indefinitely.
Here are the main benefits:
Crowdfunding comes with challenges that every founder should consider.
Below are the steps and elements that make the difference between a campaign that barely moves and one that attracts backers from day one.
Write a Story That Connects
Your story is what makes people care. Backers want to know why your startup exists, what problem you are solving, and why it matters. The most effective campaigns show both the vision and the people behind it. This is your chance to create an emotional connection while keeping the message clear and simple.
Setting a Realistic Funding Goal
Your funding goal should reflect the actual costs of producing and delivering your product, but it also works as a marketing tool. A goal that is too high can discourage early support. A goal that is too low can make your project look unrealistic. The sweet spot is low enough to be reached quickly and high enough to show credibility.
As a general guideline, many successful campaigns aim to reach their goal within the first 24 hours. For example, a product priced at around two hundred dollars might have a goal between five and ten thousand dollars, while a higher priced item in the one to three thousand dollar range might aim for around thirty thousand.
Building Trust Through Visuals
High quality visuals make your campaign stand out. A clear video that shows how your product works is often the most persuasive element on your page. Photos, prototypes, and mockups all help backers imagine themselves using your product. Visuals are not decoration. They are proof that your idea is real.
Rewards That Make Sense
If you are running a reward-based campaign, your reward tiers need to feel attractive and achievable. Early bird offers create urgency, while premium tiers can give backers something special. Keep the structure simple so that people can easily understand what they get for each level of support.
Showing the Team Behind the Idea
Backers want to trust the people they are supporting. Share who is behind the project and why you are the right team to deliver it. Highlight past experience, previous projects, or even personal motivation. A strong team profile builds credibility and reassures backers that you can deliver on your promises.
Steps to Set Up Your Campaign
Before launching, there are a few essential steps every founder should go through:
Why Preparation Matters
Campaigns that enter the platform with strong pre-launch marketing and early backer commitments tend to outperform those that simply go live and hope for traction. Preparation gives you the confidence to start strong and the foundation to build lasting momentum.
Even the best product will struggle if no one knows about it. A strong marketing strategy is what drives people to your crowdfunding page and convinces them to back your idea. Promotion starts long before launch and continues until the last day of your campaign.
Pre-Launch Strategy
The groundwork begins before you go live. Create a landing page where people can sign up for early access and collect email addresses from potential backers. Share teasers on your social channels to build anticipation. The goal is to have a group of supporters ready to pledge as soon as you launch.
Social Media and PR
Social platforms are one of the fastest ways to spread the word. LinkedIn, Twitter, Instagram and TikTok can all help you reach your target audience. Consistency is key. Share progress, introduce your team, and show how the product works. At the same time, prepare a press kit and reach out to journalists who cover startups or your industry. Media coverage can give your campaign extra visibility.
Influencer and Community Partnerships
Partnerships can extend your reach beyond your own network. Influencers and community leaders who believe in your product can act as advocates and introduce your campaign to their followers. Choose people who align with your values and already speak to your target audience.
Keeping Backers Engaged
Launching is only the beginning. Once people start pledging, you need to keep the momentum alive. Share regular updates, post behind the scenes content, and thank your backers for their support. Quick responses to questions build trust and make people feel part of the journey.
These are the main benefits that make crowdfunding such an attractive option.
Access to Capital
Startups often struggle to secure bank loans or attract venture capital in the early stages. Crowdfunding gives you another way to raise money directly from people who believe in your idea. This makes it possible to get started without waiting for approval from traditional investors.
Market Validation
When backers pledge money, it is a clear sign that there is demand for your product. Instead of guessing whether people will buy, you have real proof. This validation can also be useful later on when approaching investors, as it shows that the market is ready.
Building a Community
Early supporters of your campaign often become your most loyal customers. They are invested not just financially but emotionally in your success. By keeping them involved with updates and rewards, you create a strong community around your brand that can grow with you.
Marketing and Publicity
A crowdfunding campaign is also a marketing campaign. The process itself creates attention and can attract media coverage. Social sharing and word of mouth spread your story further, helping you reach audiences you may not have been able to reach otherwise.
A Useful Feedback Loop
Backers do not just contribute money, they also give opinions. Comments, questions, and suggestions provide valuable insights that can help you refine your product. This early feedback can save you time and resources later in the development process.
Lower Risk in Some Models
Depending on the type of crowdfunding you choose, you may not need to give up equity or take on debt. In reward-based crowdfunding, for example, backers receive the product instead of shares or repayment. This allows you to fund your project while keeping control of your company.
There are rules you need to follow. These rules depend on where your startup is based and which type of crowdfunding you choose. Understanding the legal side will save you from issues later on and help you build trust with your backers.
Crowdfunding in the European Union
Since 2021, the European Union has introduced a single framework called the EU Crowdfunding Regulation. This means that while details can differ from country to country, most rules are now aligned across member states.
For equity crowdfunding, this regulation sets standards for how much you can raise, how platforms must operate, and what information you must share with investors. It is designed to protect investors by ensuring they receive clear, transparent, and comparable information before putting money into your startup.
If you plan to raise money from investors across different EU countries, this regulation makes it easier because you no longer have to comply with separate national systems.
Transparency and Disclosure
No matter which model you choose, being transparent is crucial. Equity crowdfunding has the strictest rules. You will need to disclose details about your business model, financials, risks, and the rights investors will have. Even for reward-based campaigns, honesty about timelines, product readiness, and possible risks is essential. Backers want to know where their money is going, and clear communication reduces the chance of disputes.
Crowdfunding Rules in the United States
If you are considering raising money from US investors, you need to be aware of Regulation Crowdfunding, also known as Reg CF. It was introduced under the JOBS Act and allows companies to raise up to five million dollars within a twelve month period. Both accredited and non accredited investors can participate, but there are limits to how much individuals can invest based on their income.
Reg CF also requires startups to work with registered platforms and to provide detailed disclosures, including financial statements. Like in the EU, the goal is to protect investors and ensure fair practices.
Reaching your goal is an exciting moment, but the real work starts once the campaign ends. What you do next will shape how backers see your startup and whether you can use your success to grow further.
Delivering on Promises
The first priority is fulfilling what you promised during the campaign. If you offered rewards or pre-orders, make sure production and shipping happen as planned. Delays can happen, but transparency is key. Keep backers informed about progress, even if there are challenges. Honest updates are always better than silence. Delivering on time builds trust and creates a foundation for long-term loyalty.
Maintaining Investor and Backer Relationships
Backers and investors are more than just financial supporters. They can become advocates, repeat customers, and even partners in your journey. Keep them engaged with regular updates, share milestones, and let them see how their support is making a difference. A simple thank-you message or behind-the-scenes look at your progress can go a long way in building lasting relationships.
Leveraging Campaign Success
A successful campaign does not only give you funding. It also proves demand for your product. This traction is valuable when approaching venture capital firms or angel investors for the next round of funding. Being able to show that hundreds of people already paid for your product is a strong signal that your idea has real market potential.
Scaling Beyond Crowdfunding
Crowdfunding should not be seen as the end goal. It is a starting point for growth. Use the community you have built to test new features, gather feedback, and refine your offering. Early adopters often become the core of your long-term customer base.
At the same time, start preparing for how to scale production and distribution beyond the campaign. Crowdfunding platforms are great for first launches, but long-term success comes from turning those early wins into a sustainable business model. Think about building partnerships, expanding your marketing channels, and exploring new markets once the initial momentum is secured.
Turning Momentum Into Growth
The best founders treat crowdfunding as both a launchpad and a learning process. By delivering on promises, keeping backers close, and showing investors real traction, you can turn a one-time campaign into a growth engine for your startup.
Crowdfunding gives startups the chance to raise money while also proving that their idea has real demand. It helps founders connect with early supporters, build a community, and create visibility before scaling further. The campaigns that succeed are built on preparation, a strong story, and clear communication. Momentum often begins before launch and trust grows when promises are delivered. With patience and persistence, crowdfunding can become the foundation for long term growth.
Read more:
⏩️How to Get Seed Funding: The Ultimate Startup's Guide
⏩️Building a Solid Business Plan for Pre-Seed to Seed Funding
⏩️Choosing the Right Investors for Your Startup: Proven Tips and Winning Strategies
⏩️ Funding Rounds Are Dead | Why the Old Pre-Seed to Series E Model No Longer Works
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