Skip to main content
  • Claims Center
  • Contact Us
  • Español
  • Brokers & Agents
Hiscox Insurance
Menu Toggle
  • Home
  • Small Business Insurance Small Business Insurance Toggle Menu
    Protect your business, plan for the unexpected, and help your business grow.
    • Top Coverages

      • General Liability Insurance

        The basic protection for claims against your business.

      • Errors and Omissions

        Protection against claims of negligence

      • Professional Liability

        Protection for specific risks in your field.

      • Business Owners Policy

        General Liability plus coverage for property.

      • Short-Term Liability Insurance

        Purchase coverage for a specific period of time.

      • Cyber Security Insurance

        Protection from cyber-related security risks.

      • Workers Compensation

        Protection from work-related illness or injury.

      • More Coverages

        Umbrella, Auto, Directors and Officers, and more

    • Coverage for 180+ Professions

      • Architects & Engineering
      • Beauty
      • Contractors
      • Consulting/Freelancing
      • IT/Technology
      • Landscapers
      • Marketing
      • View All Industries
    • Coverage for 49 States

      • View All States

    Retrieve Your Saved Quote

    Small Business Insurance Main Page

  • Why Hiscox Why Hiscox Toggle Menu
    With a single focus on Small Business Insurance, we provide fast, customized coverage just for you.
      • About Us
      • Customer Stories
      • Ratings & Reviews
      • Our Brand
      • Newsroom

    About Hiscox Main Page

  • Resources Resources Toggle Menu
    Insights and information to empower you and your business.
    • Blog
      • Start Your Business
      • Grow Your Business
      • Protect Your Business
      • Celebrate Courage
      • Business Insurance 101
      • Research & Insights
      • Partner Services
      • Insurance Glossary
      • Profit Calculator
      • Business Templates

    Resources Main Page

  • Policy Management Policy Management Toggle Menu
    We make it easy for policy-holders to make changes, access documents, and report claims.
    • Manage Your Policy Online

      • Hiscox Policy Management

        • Change Business Address
        • Get an ACORD Certificate
        • Get a Certificate of Insurance
        • Issue an ACORD for an Additional Insured
        • Request Policy Documents
        • And more

    • Claims

      • Claims Center
      • Report a Claim
      • Claims FAQs
      • Claims Customer Reviews
      • Cyber Vendor Services
      • Refer a friend

    If you purchased coverage from a broker and would like to update or change your policy, please contact your broker.

    Policy Management Main Page

  • Claims Center
  • Contact Us
  • Español
  • Brokers & Agents
  • About
  • Get a Quote Get a Quote
  • About
  • Get a Quote Get a Quote
  • Blog Home
    Start Your Business
    Grow Your Business
    Protect Your Business
    Celebrate Courage
    Search

    Twenty-Four Seven

    Sign up to get the latest small business news delivered right to your inbox.
    Close Close
    Grow Your Business
    March 9, 2016
    crowdfunding 2

    Small business financing: What is crowdfunding?

    Marketing | Finances
    By: Hiscox Blog

    Share Image

    Embed Image

    Copy

    Share Article:

    You’ve probably heard the term ‘crowdfunding.’ Or you may have heard of some of the sites associated with it, like GoFundMe and Kickstarter. But what is crowdfunding, how does it work and how can you use it in your business? It’s one creative strategy that you can use for small business financing, so let’s take a deeper dive. First things first though: Before you start raising millions of dollars in a successful crowdfunding campaign. You need to protect your business with commercial general liability insurance.

    Crowdfunding defined

    According to dictionary.com, crowdfunding is ‘the activity or process of raising money from a large number of people, typically through a website, as for a project or business.’ The theory is that if you can collect a small amount of money from each person in a large group, you can reach your larger goal.

    Crowdfunding donors can be people you know or strangers. Sometimes, a good cause or an intriguing venture can go viral, raising funds from people all over the world.

    How Crowdfunding Works

    Anyone can start a crowdfunding campaign for just about any reason. If you need money for a legitimate purpose, you can post information on the crowdfunding site, stating how much you need and why. You also set an expiration date for the campaign.

    Those who wish to donate can do so through the site. The money is collected by the site and disbursed to the fundraiser at the end of the campaign. Some sites require that you raise the total amount you’re asking for by the end of the campaign, which is known as the ‘all or nothing’ model. If you don’t reach your goal, the money collected goes back to the donors. Other sites let you keep whatever you raise, regardless of whether you reach your goal or not. Once your campaign has ended, the money raised will be deposited to your account. The crowdfunding site takes a small percentage of the money raised to cover their costs.

    What crowdfunding funds

    Different sites focus on different types of campaigns. For example, GoFundMe is geared toward charitable causes, such as people who need money for medical treatment or victims of natural disasters.

    Kickstarter is geared toward creative endeavors, and specifies that ‘projects must create something to share with others.’ Kickstarter prohibits fundraising for charity or offering equity in exchange for cash. Kickstarter uses the all-or-nothing model, so if you don’t reach your funding goal within the timeframe you’ve selected, the donations are returned to the backers.

    Crowdfunding sites will warn fundraisers not to try to raise money for illegal activities or to promote inappropriate content, but there’s very little actual policing of these rules. Donors are encouraged to do their own due diligence to satisfy for themselves that the cause they are supporting is legitimate.

    Make sure the crowdfunding site you choose allows—and even encourages—businesses to raise funds on their site. Clearly define how much money you need and for what purpose. If you’re selling a product and are using crowdfunding to take advance order so you’ll have the money to manufacture, be clear about this. Let people know when they can expect to receive the product.

    Crowdfunding sites

    Choosing the best site for your crowdfunding campaign is critical to its success. Make sure the site you choose offers the kind of funding that will be best for your project. Here are some resources you should consider:

    • GoFundMe focuses on raising money to help people in difficult circumstances, like those who need expensive medical treatment or who have been victims of a natural disaster.

    • Kickstarter- is geared toward creative and business funding. In fact, charitable fundraising is prohibited on this site. Kickstarter is a good choice if you need money to manufacture a product, because they encourage product pre-sales and they use the all-or-nothing model.

    • Indiegogo – lets you choose either all-or-nothing or flexible funding. You must offer ‘perks’ which can be the product you’re producing, or something else, and can vary by funding level. For example, a musician raising money for a new album may offer a CD at a certain funding level, a CD and t-shirt at a higher level, and a mention in the liner notes for the highest level.

    • RocketHub – lets you keep all your funds regardless of whether you reach your goal. The focus is on projects in the areas of the arts, science, business and social good.

    How to Achieve Crowdfunding Success

    Here are some tips to make your crowdfunding project successful.

    1. Create a compelling description of your project, including pictures if possible. Try to answer any question a donor might ask in your description.

    2. Publicize your project through social and traditional media. Post a link to your crowdfunding page on all of your social media channels, and encourage your friends and family to do the same. Contact local TV stations and newspapers by email to let them know about your project. They may be interested in covering your story, especially if it is unique or touching in some way.

    3. Don’t be shy. Make everyone you know aware of your project. If you’re like most crowdfunders, the majority of the money you raise will come from people you know.

    If you need money to start or grow your business, crowdfunding can be a viable option for you. Choose the right site, craft a compelling project description, and spread the word!


    Protect Your Business

    Protect the business you’ve worked so hard to build. Get a fast, free quote and your business could be covered today.

    Get a Quote
    Get a Quote
    Subscribe to our newsletter

    Related Articles

    4 Min Read
    Wood blocks with arrows on them arranged in stairs formation. Strategic planning for business.

    Strategic planning for your small business: What it is and how to do it

    Management

    A strategic plan is different from a business plan. A strategic plan is more dynamic and will change and grow with your business. Here are 4 Steps to creating a strategic plan for your business. Read More

    5 Min Read
    Two men at work fist bumping. start up. business partnership.

    A 7-point checklist for a successful business partnership 

    Tools & Templates | Management

    What makes a successful business partnership? Here are 7 things to consider when starting a partnership business. Read More

    5 Min Read
    Scissors cutting a dollar bill. Business expenses and budget.

    10 Cost-cutting ideas to reduce business expenses now

    Finances | Management

    The key to business growth requires the right balance between increasing sales and cutting unnecessary costs. Here are 10 tactics to help you reduce business expenses now. Read More


    We’re here to help.
    We provide tailored insurance for the specific risks you face, so you can take the right risks to grow your business.
    Get a Quote
    Get a Quote
    Blog, Footer2021
    • What We Cover
      • Business Insurance
      • General Liability Insurance
      • Professional Liability Insurance
      • Errors and Omissions
      • Cyber Security Insurance
      • Workers Compensation
      • Other Coverage
    • Who We Cover
      • Small Business Owners
      • LLC
      • Side Hustle
      • Contractors
      • Home Businesses
      • 180+ Professions
    • For Our Customers
      • Refer a Friend Program
      • Covid-19 Response
      • Claims Center
    • For Business Owners
      • Save with our Partners
      • Hiscox Podcast for Business
    • About Hiscox
      • About Us
      • Careers
      • Contact Us
      • Hiscox Corporate
      • Investors
      • Foundation
      • Newsroom
      • We Stand Together
      • Affiliate Partner Program
    Blog, Footer, 2nd Row (new)
    • Accessibility
    • Site Map
    • Privacy Policy
    • Terms of Use
    • Legal Notices
    • Español

    Feefo Reviews: Hiscox rated 4.8/5 with 2,032 reviews between January 31, 2020 - January 21, 2021

    © 2021 Hiscox Inc. All rights reserved. Underwritten by Hiscox Insurance Company Inc., 104 South Michigan Avenue, Suite 600, Chicago, IL 60603. As of December 31, 2020, HICI had admitted assets of $1,022,623,751 and policyholders surplus of $288,410,992. Total liabilities were $734,212,759 (inclusive of $327,715,543 of loss reserves) and paid up capital stock was $4,242,000.

    icon-facebook
    icon-youtube
    icon-twitter
    icon-linkedin