What is crowdfunding?

Crowdfunding literally means: raising money from the crowd. You must tell as many people as possible about your plans and ask if they are willing to invest in it. You do this through an online crowdfunding platform, where you create a campaign. You advertise your plans via the campaign.

Why choose crowdfunding?

• You require money for your business.
• You would like feedback on your service or product. You can use a crowdfunding campaign as market research or as a marketing campaign.
• Crowdfunding creates a special bond between your business and the people who invest in it: they become fans, sometimes ambassadors, and are loyal customers.
• The criteria of crowdfunding platforms are clear.
• You can usually start a campaign quite easily. 
• Crowdfunding is easily accessible for investors: there are some platforms where they can get on board for as little as a few tenners. Crowdfunding serves as an alternative to savings accounts or investment accounts. 

What do you need to watch out for?

Raising funds takes time, and crowdfunding is no exception: preparing your campaign is a complex and time-consuming process. For example, you will need to prepare a short pitch. Or a video to explain what you plan to do, how you are going to do it, and how much money you need. And explain what investors can expect in return if they decide to support your business idea. You also need time to contact members of your network (digital or otherwise). You must also be transparent about your numbers and your business’s strategy. Make a point of keeping your investors informed after the campaign is over.

Every platform has its own set of requirements and uses its own approach. Find a platform that suits your wishes and sector. Compare the conditions of several platforms. It makes it easier to choose. 

How much money can I raise?

You decide how much money you would like to raise through crowdfunding. Platforms often specify a minimum amount of €25,000 on account of the time and costs involved in a campaign. Business owners raised an average of €350,000 in 2022.

How do I get started?

It is easy to get started with crowdfunding. Complete the 7 steps of the Crowdfunding step-by-step plan. These are the steps, in short:

• Make a plan.
• Think how you are going to reward the investor.
• Choose a crowdfunding platform.
• Make a good pitch.
• Tell as many people as possible about your plan.
• Start your crowdfunding campaign.
• Stay in touch with your investors.

What are the various types of crowdfunding?

When people invest in your business, they will usually expect something back. You can personally choose how to repay the financial contribution from the crowd. There are 4 options:

• 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. A crowdfunding loan is the most popular type of crowdfunding financing. In 2022, 88% of all the money raised by crowdfunding was a loan. 
• 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. Say you want to start a coffee bar. You could offer your investors a free cup of coffee every Friday for one year. Explain clearly in your campaign what the reward for your investors will be. 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 will be imposed in this case.

Crowdfunding and taxes

The Netherlands Tax Administration regards the 4 types of crowdfunding as income. Every situation is different and is therefore also subject to different tax rules. Contact the Tax Administration (in Dutch) to find out if, and how much, tax you are required to pay. Alternatively, you can also consult a bookkeeper, administration expert or tax expert (in Dutch), an accountant through NBA or SRA, or a tax adviser (in Dutch).

Help with financing

Help increases your chances of obtaining financing, and with the right adviser and a good financial rationale, you will get your finance application approved in no time. These advisers will help you get started. Also watch the video Financing your business.