Crowdfunding for a company is more than just money
In recent years, startup and small business owners have seen a huge increase in crowdfunding. Today, it is one of the most popular ways for business owners to finance their business operations without going to a bank to apply for a conventional loan. Of course, crowdfunding does not prevent someone from approaching a bank to obtain a business loan.
However, it only makes sense for someone to plan their roadmap carefully and meet all your financial needs with an effective crowdfunding campaign on the right platform. For anyone who believes that crowdfunding is just one way to raise funds from many different people, you need to reconsider.
Crowdfunding is much more than collecting money
Much easier than traditional financing
Traditional financing is a huge challenge for entrepreneurs and small business owners. As soon as you are at a point where you need to raise funds for your business, start reaching out to wealthy people, angel investors, venture capitalists, banks, and other lenders for investments. The problem here is that you start on the wide side of the funnel and narrow your options from there to get to the pointy side of the funnel – that is, finding the right investors. If you can’t come to terms with your final option, you will end up wasting all your efforts and time.
On the other hand, crowdfunding is the exact opposite of traditional financing. Start at the pointed end of the funnel, build your crowdfunding campaign, and let the right people find out. Those who find your concept appealing and attractive will invest. You won’t have to go door-to-door to find the right person to invest in you, your business, and your idea. This makes crowdfunding much easier than traditional funding.
Better reach to market
In order for you to increase your chances of getting the right investor on your side, you need to be at every location, seminar and meeting where you think you will have the opportunity to meet potential investors. However, you can only get so much done in the limited time you have before someone else copies your idea and capitalizes on it. On the other hand, when you choose crowdfunding as a way to financially boost your business, you don’t have to rely solely on your marketing efforts and reach. The first step in crowdsourcing is finding the right platform, as there are so many to choose from.
You have to choose your crowdfunding platform based on its popularity and reliability with the public. In short, you benefit from the market reach of the platform. If your crowdfunding platform is popular on multiple continents, you can expect your funds to come from all of those places.
Less risky than traditional funds
One of the biggest problems with traditional financing, especially venture capital, is that such financing carries a great deal of associated risk. Venture capitalists are people or institutions that are often more interested in their own financial gain than in seeing your business grow. Your purpose of investing in your business is to double or triple your investment. For that reason, they will often have very strict regulations associated with their investments. If they are in doubt about the success of your idea, they will often try to give you the money as a repayable loan; regulations will remain strict.
If they think your product / service will become a massive success, they will try to offer permanent royalty deals or try to take as much capital out of the business as possible.
People who fund your business through crowdfunding may not even apply for any stake in your business. Their contributions can be as small as $ 5 and they may not even expect anything in return. Sometimes they can make big investments without asking for a lot of capital. In many cases, your rewards are as simple as a free product sample.
Get the professionalism out of you
The fact that crowdfunding is less risky than traditional financing does not mean that you can be casual with it. Asking the world to invest in your concept is serious business and you have to do your best to convince people to invest in you. The first thing you will have to do is come up with a proper business plan. Second, you want to have a team of the right professionals by your side that people can look at and trust. If the air around your team is negative, people will not invest a single dollar in you. You should also have a good explanation of where you will spend the money you raise.
If you have prototypes, bring them up front. Create videos to show your technology. Make sure your product / service is a solution to an existing problem. Don’t create a problem and then fix it with your product. Angel investors often frequent crowdfunding platforms and need to make sure they are investing in serious people and businesses, not a hobby.
Helps you build a community of followers
Much of the investment in crowdfunding websites comes in the form of small contributions. These people are not investors, but normal people who like an idea and want to see it in practical terms. They believe that their idea can solve one of their problems or perhaps make the world a better place. If you can convince them that your idea does one or both, they will actively invest in it. These people are early adopters of your technology / product / service and will also act as word of mouth marketers for your brand.
It is no coincidence that crowdfunding has become one of the most popular ways for startups and entrepreneurs to support their initial growth, marketing, and expansion through crowdfunding. They must be seeing some benefits of funding their efforts through crowdsourcing over conventional funding. If you are someone who is considering the same route, the first advice for you would be to choose a platform with trust, reputation and reach for your crowdfunding campaign.