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Crowdfunding involves getting lots of people to give small amounts of money to help fund your business. For example, to pay for a special project or launch a new product.

Depending on the type of crowdfunding you use, you might also offer financial or non-financial incentives to get people to support you.

Follow these steps to see if crowdfunding is right for you and how to set up and run a campaign.

1. Understand the different types of crowdfunding

There are 4 main types of crowdfunding. Each uses a different way to attract backers. They may also have different legal and tax responsibilities for the parties involved.

Use donation-based crowdfunding to raise money for one-off projects. Donors give money to your business without getting anything in return. This funding model is common for social enterprises and not-for-profit businesses.

In reward-based crowdfunding, you give your backers a reward in return for their money. This could be:

  • goods or services
  • a public acknowledgement
  • a discount when they buy the product you're developing.

For example, for every $10 donation you get, you’ll thank the donor on your website. For every $20 donated, you’ll give donors 5% off when they buy your product.

Debt-based crowdfunding is also called peer-to-peer lending. It connects businesses with groups of investors. Backers lend money to your business, and you repay the loan with interest over time.

Equity-based crowdfunding is also called crowd-sourced funding (CSF). It’s a way for eligible companies to raise money without taking on debt.

People can invest up to $10,000 a year in return for ordinary shares in your company. Your company can raise up to $5 million in any 12-month period.

The crowdfunding website you use must have an Australian Financial Services (AFS) licence from the Australian Securities and Investments Commission (ASIC).

This model is complex, needs legal and financial advice and has compliance costs. It also has ongoing reporting obligations.

Learn more about crowd-sourced funding on the ASIC website.

2. Decide if crowdfunding is right for you

Crowdfunding can work well for some businesses, but it isn’t the right fit for every idea or product.

As well as choosing the type of crowdfunding you’ll use, you need to weigh up the benefits, effort and risks before you commit.

Benefits of crowdfunding

Crowdfunding can help you:

  • test your idea early and improve it based on feedback
  • connect with potential customers
  • build early interest in your idea or product
  • raise money quickly.

What’s needed from you

A successful crowdfunding campaign takes time and active promotion. You’ll need to:

  • tell a clear story about your idea or product
  • promote your campaign regularly
  • update and respond to your backers throughout the campaign
  • give them the rewards, payments or shares you’ve promised.

Other things to consider

It’s important to consider if crowdfunding suits your goals and circumstances. It may not be the right choice if:

  • you’re unsure you can reach your funding goal
  • your idea is hard to explain simply
  • you don’t have time or resources to promote the campaign
  • your rewards or offer create legal or tax obligations you can’t meet
  • there are many similar campaigns competing for the same audience or product space.

If things don’t go to plan

Before you commit to a crowdfunding platform, check its terms and conditions to understand what happens if you don’t reach your goal. Some platforms let you keep the funds but others don’t.

Also check what happens if you can’t fulfil some or all of your campaign promises. You may need to amend or cancel the campaign or refund backers if you’ve already gotten their money.

Equity-based crowdfunding may have other legal obligations, so check these with ASIC or your legal adviser.

3. Check the rules

Depending on your business idea and the type of crowdfunding you choose, you may need to:

  • register for licenses
  • meet legal terms and conditions
  • understand tax obligations.

This is especially important if your business idea or offer involves a financial product or shares.

4. Set your goals

Set clear goals so your backers know what to expect. Work out:

  • how much funding you need to develop your idea or product
  • how long your campaign will run
  • when you expect to deliver what you’ve promised backers after the campaign ends.

Most crowdfunding websites need you to set a funding goal and timeframe before you can post your campaign.

5. Plan your campaign

To start planning your campaign, think about:

  • How to describe your idea or product: explain what it is in simple words and what makes it different from others.
  • Why people should support you: share why your idea or product matters and why others might care.
  • What you offer: list what backers will get for their money, such as early access, special items or shares.
  • Your communication schedule: plan when you’ll share updates and keep your backers informed during the campaign.

6. Choose your campaign platform

There are many different crowdfunding websites. Do some research to find the platform that best suits your business's needs.

Find out:

  • the types of business ideas or products they accept
  • their terms and conditions
  • the audiences they reach and how they will help promote your campaign
  • their funding model – some let you keep what you raise (flexible funding), while others pay only if you meet your goal (all-or-nothing funding)
  • their fees – some charge upfront fees, while others only charge if you reach your goal.

7. Post your campaign online

You can make your campaign stand out with clear writing and strong images.

Most platforms ask you to upload photos, videos or other content that helps explain your idea.

Look at successful crowdfunding campaigns for ideas on how to structure your pitch.

8. Interact with your audience

When your campaign is live, use social media and other channels to reach more people. Keep your backers up to date with your progress and respond to their questions.

Regular updates and responses make your backers more likely to share your campaign because they:

  • feel noticed and included
  • see progress they can talk about
  • trust your project.

Backers often share campaigns that are active, transparent and making progress.

9. Wrap up your campaign

If you haven’t reached your goal, follow your platform’s rules about refunds or closing your campaign.

If you’ve reached your goal, thank your backers and give them the rewards, payments or shares you’ve promised.

If your delivery timeline changes, update your backers early so they know what to expect.

Some platforms or funding models may also have reporting or legal obligations, so check what you need to do after your campaign ends.

Continue sharing updates with your backers to keep them interested while you develop your idea or product.

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