• August 31, 2022

Crowdfunding for a company is more than money

In recent years, startup and small business owners have seen crowdfunding increase tremendously. Today, it is one of the most popular ways for business owners to finance their business operations without going to a bank for a conventional loan. Of course, crowdfunding doesn’t stop someone from approaching a bank for a business loan.

However, it only makes sense for someone to plan their roadmap carefully and meet all their financial needs with an effective crowdfunding campaign on the right platform. For anyone who believes that crowdfunding is just a way to raise funds from many different people, you need to rethink that.

Crowdfunding is much more than collecting money

Much easier than traditional financing

Traditional financing is challenging for entrepreneurs and small business owners. As soon as you are at a point where there is a need to raise funds for your business, start approaching wealthy individuals, angel investors, venture capitalists, banks and other lending institutions for investments. The problem here is that you start at the wide side of the funnel and narrow your options down from there to get to the pointed side of the funnel, i.e. 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. You start at the pointy end of the funnel, create your crowdfunding campaign, and let the right people discover you. Those who find your concept attractive and appealing 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 financing.

Better reach to market

To increase your chances of having the right investor on your side, you need to be at every venue, seminar, and meeting where you think you’ll have a chance 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 takes advantage of 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 outreach. The first step in crowdsourcing is finding the right platform, as there are so many to choose from.

You should choose your crowdfunding platform based on its popularity and reliability in 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 has many risks associated with it. Venture capitalists are individuals or institutions who are often more interested in their own financial benefit than in seeing their business grow. Your purpose for investing in your company is to double or triple your investment. For that reason, they will often have very strict regulations associated with their investments. If they have doubts 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 huge success, they will either try to offer permanent royalty deals or try to take as much of your capital out of the business as possible.

The people who finance your business through crowdfunding may not even apply for a stake in your company. Their contributions can be as little as $5 and they may not even expect anything in return. Sometimes they can make large investments without asking for a lot of capital. In many cases, your rewards are as simple as a free product sample.

Get professionalism out of you

Just because crowdfunding is less risky than traditional financing doesn’t mean you can be casual with it. Asking the world to invest in your concept is serious business and you need to be at your professional best to convince people to invest in you. The first thing you will need to do is draw up a proper business plan. Second, you want to have a team of the right professionals on your side that people can look up to and trust. If the air around your team is negative, people won’t spend a single dollar on you. You should also have a good explanation of where you will spend the money you raise.

If you have prototypes, bring them to the front. Create videos to showcase 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 create a community of followers

Much of the investment in crowdfunding websites is 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 form. They think their idea can solve one of their problems or maybe 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.

final thoughts

It is no coincidence that crowdfunding has become one of the most popular ways for new businesses and entrepreneurs to support their early growth, marketing, and expansion through crowdfunding. They must be seeing some benefits of financing their efforts through crowdsourcing instead of conventional financing. If you are someone who is considering the same path, the first advice for you would be to choose a platform with trust, reputation and reach for your crowdfunding campaign.

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