Starting crowdfunding

Complete the 7 steps of the KVK Crowdfunding step-by-step plan

1. Draft a plan

For what purpose do you need funding? You can explain this in your business plan or Business Model Canvas. State your funding needs (financial plan) and what amount you intend to raise through crowdfunding. Try to make as realistic an estimate as possible. 

In 2022, companies raised a total of €350.000 on average through crowdfunding. You can raise between €25,000 and €2.5 million through various platforms.

In some cases, you need other types of external financiering in addition to crowdfunding to raise the full amount. We refer to this as a financing mix. The business plan serves as the basis not only for your new product, service, idea, or company, but also for your crowdfunding campaign.

2. Determine the compensation payable to your investors

Think about the amount you will offer your investors. What is a realistic amount? You should present an attractive offer that will get the investors’ interest. There are several options you can combine:

• Equity capital

The investors acquire shares in your business and receive dividends (compensation depending on the profit earned).

• Loan capital

The investors provide a loan. You determine the interest rate and term of the loan, within a specific range. Start-ups have high-risk profiles, which automatically means you will need to offer the investors a higher interest rate. The crowdfunding platform will be able to advise you on this.

• Convertible loan capital

This is loan capital you can convert into equity: a convertible loan or bond loan. This is a loan you can convert into shares at a future date.

• Rewards or consideration

You offer the investors something in return in the form of a product or service. You can come up with an original, playful idea if you like. Note: the value of that product or service is subject to value-added tax (VAT).

• Donation

The investors give you the money and do not expect anything in return. You should keep in mind that gift tax may be imposed in this case (this tax will be imposed above a certain amount).

3. Choose a crowdfunding platform

Choose a crowdfunding platform that best suits your purpose. Some important considerations include:

• what crowdfunding model is used
• the amount of money you require
• the duration of the fundraising campaign
• the maturity of the loan
• the sector or industry in which you operate 

4. Make sure you have a strong pitch

Since a short and strong message is important when it comes to getting financiers interested in your plan. So, prepare a strong pitch. Ask yourself what investors want to know from you before doing business with you. Give them a little personal background, and add some passion to your story. Explain what problem your product, service, idea, or business will solve, and for whom it is intended. This way, you can explain clearly what the investors will be investing in. Explain the risk and return to the investors, using appealing visuals and a video pitch. For inspiration and examples, check out the videos on the various crowdfunding platforms.

5. Mobilise your network

Before launching your crowdfunding campaign, you can start informing and mobilising your existing network. Let them know you are looking for funding, for what purpose, and when the campaign will go live. This way, you will find ambassadors for your plan. Note who has committed, and gauge people’s interest. You could, for example, organise a launch party before the start of your campaign in order to generate publicity.

6. Launch your campaign

Your campaign is set to go live, and the campaign period will now start. You should use this particular time to tell others about your campaign, both online and offline. Give your story a personal touch and show that you are 100% committed. Use (social)media to promote your campaign.

7. Keep in touch with your investors

If all goes well, you will have raised your target amount by the end of the campaign. You are now ready for the next stage: you can start accomplishing your goals. It is important, at this stage, to keep communicating on the progress of your activities. Honour your commitments and pay your investors their compensation. Keep the lines of communication with your investors open. Also, or rather especially, if your plans are delayed for whatever reason.

Tax when receiving money from crowdfunding

Crowdfunding comes in different forms: a loan, a donation and in exchange for a product or company share. In all these situations crowdfunding is seen as a form of income and you will need to pay tax. But it is different in each situation and is related to different tax rules. To find out if and how much tax you need to pay, contact the Tax and Customs Administration.

Tips for crowdfunding

• Make sure you have enough time to spend on crowdfunding. The lead time is between four and six months.
• There is no such thing as free crowdfunding. You always have to make investments for a campaign. For example for your promotional material such as videos.
• Strangers are not so quick to invest if there is nothing has been donated yet. So, first make sure that acquaintances from your network invest an amount.
• The investors are the ambassadors of your company. Keep them regularly informed.

Help with financing

Help increases your chances of obtaining financing, and with the right advisor and a good financial plan, you will get your finance application approved in no time. These advisers will help you get started.

If you have a question about loans or other financial issues, you can contact the KVK Financing Desk: 0800 10 14.