Crowdfunding is a collective effort of many individuals who network and pool their resources to support efforts initiated by other people or organizations. This is usually done via or with the help of the Internet. Individual projects and businesses are financed with small contributions from a large number of individuals, allowing innovators, entrepreneurs and business owners to utilize their social networks to raise capital. Energy communities can engage the crowd to obtain ideas, collect money, and solicit input on the project, fostering, in this way, an environment of collective decision-making and strengthening the connection with potential customers.
If you are part of an energy community, crowdfunding will support you to pull together the resources and capital required for capital-intensive off-grid energy projects.
The crowd are all the individuals who decide to participate in the projects. In order to succeed in a crowdfunding campaign, it will be necessary to generate a community of people willing to support your energy community. The crowd can be linked to geography, special interest or more broadly distributed, but will need to be engaged by the project owner.
One of the main advantages of crowdfunding is indeed that the supporters are also potential customers and ambassadors of the energy community, and they will help to promote it through their own networks.
Donation: For socially motivated or not-for-profit projects. Individuals donate small amounts while receiving no financial or other return.
Reward: The funders receive non-financial reward, like products or services, for their contribution. In reward-based crowdfunding, the perceived value of rewards should be higher than the economic one.
Lending: Individuals lend money to the project with the expectation that the money will be repaid with an interest. Lending is relevant for energy communities that can credibly assure lenders of being able to pay back the loan. Like for the banking system, the interest rate of the loan is determined by the risk of the investment. Moreover, in this model the ownership is not diluted, while the company can exploit the financial leverage effect.
Equity: This model allows the community to offer a percentage of its shares to a number of individuals (investors) in return for:
Holding a percentage of ownership.
Participating in profit generation or dividends.
Donation: Funders are primarily driven by philanthropic values, and they want to see promised benefits unfold for the charity cause that they are financing. They will certainly appreciate your “thank you” and perhaps giving back something small with no economic value could be a good idea.
Rewards: Consider that rareness of perks may increase the attractiveness of your campaign: you could ask third parties for rewards that you can use in your campaign if you can’t offer them yourself.
Lending: In this case, compelling incentives could be a competitive interest rate, high enough to be enticing but as low as possible at the same time. They also value frequent and early returns.
Equity: Funders are long-term investors, and they are mainly interested in the potential growth of your project: they want to be part of a success story! Also, any perk you could offer them will be welcome.
Set a clear objective: First, you have to set a clear objective and make sure that is shared by funders, staff and partners. The clearer, more concise and specific you are, the better the chances that the campaign will live up to the funding goals you have set. You can ask experts for assistance if you need so.
Set your funding target: To set your funding target you have to begin with your financial plan. To define the right amount you would like to raise, you have to specify all costs and outlays of the project and account for the platform’s fees and other campaign related costs.
Identify the fitting type: Each type of crowdfunding has its own funding limits, so after setting your financial needs you can identify the types of crowdfunding that best suit your project. While donation-based campaigns are commonly limited to 30.000 Euro, reward-based campaigns may generate around 50.000 Euro. For larger sums you may want to consider equity or lending. The requirements for these are linked to the financial performance and capitalisation needs of your energy community.
Engage your network: You have to find out your target group’s preferences and create attractive rewards and perks to capture your funders’ attention. It is also important to prepare a convincing story where you explain your backers why you are running the campaign, what’s the project about and why and how they should support your energy community. It is also very effective to present yourself, the community and the current status of the project. It will be very important to have a communication plan for your campaign. Then you can move on to create a community for your campaign, which involves heavy use of social media platforms and other channels. You should also combine online and marketing communication tools with offline events. The more you involve your community and keep them informed, the better are your chances to gain support.
Optimise the time period of your campaign: During the campaign, it is very important to know that you have a limited time period to reach your funding goal, so every day counts. Normally crowdfunding campaigns last between 30 to 60 days, depending on the platform and the model chosen (lending platforms often use a different model and are able to fund your business much faster). To optimise this period, it will be important to divide it into 3 phases:
Use the Spider Gram to map your network and identify the individuals and/or organizations you need to engage to support your crowdfunding campaign.
Use the Crowdfunding Canva to prepare and layout your campaign: write down your vision, set up your strategy, and identify your ideal crowdfunding model!
Use the Campaign Checklist to be sure you covered all the essential steps before launching your campaign!
You should keep in mind: