The Pros of Crowdfunding
There are several strategies to receive funding in the early stages of a startup. With these strategies come both advantages and disadvantages. With the rise of crowdfunding as means to obtaining capital, it is important to see just how beneficial using this approach can be for venture.
1. Access to Capital: Crowdfunding is a great alternative from the usual early stage financing strategies. It allows you to raise capital without acquiring debt or having to give up any equity.
2. Free Press: Most crowdfunding is done via crowdfunding website. This alone allows your campaign to be seen by hundreds of investors who want to protect their investment by creating online popularity through social media and other online channels. Successful crowdfunding campaigns can potentially attract future investments from traditional channels and attention from media outlets.
3. Source of Feedback and Brainstorming: Whether or not your campaign is successful, you will receive feedback. If people are responding positively to it and invest, then it is likely it will do well. If you end up not meeting your goal, then you know there is some tweaking that needs to be done. Either way, your campaign will allow you to engage the crowd and receive comments, feedback, and ideas. Since this feedback is coming directly from your peers, it is extremely valuable and can help you attempt to perfect your idea.
4. Speed of Response: Most crowdfunding campaigns are online and typically on a month long timescale. This gives you the ability to raise money quickly without having to go through any loan or pitching processes.
5. Marketing/ Serves as a marketing tool: Crowdfunding its self serves as a form of marketing. It is a way to introduce your mission and vision to the market. Interest and awareness is created from the very beginning of your project, so when your product is ready your peers will be there waiting. Crowdfunding is a free and easy way to reach numerous channels and pushes you to build up your social media networks and use all of your contacts. Your contacts are important as they have the ability to share and spread the word to their connections, giving your campaign the opportunity to engage more supporters and grow a larger audience.
6. Less risk: Starting a company is a risk within itself. It comes with its own set of challenges and unforeseen expenses, on top of the necessity of finding sufficient funding. Crowdfunding allows you to avoid the risk involved when taking a loan or giving up equity since investments are donation based.
7. Gives proof of concept: Crowdfunding gives you the market validation needed in the next stages of funding. Showing future investors that you had a successful crowdfunding campaign confirms to them your venture’s credibility and potential for even more success.
8. Introduces prospective to loyal customers: A good crowdfunding campaign shares the product or idea, as well as, the message and purpose behind it. People will not invest in your business unless they care about message, and those who do invest early on are likely to be loyal customers and long term supporters. These early adopters should been seen as a valuable networking opportunity since they are the ones who believe in your success and help spread the word without any reciprocation.
9. Easier than traditional funding processes: Crowdfunding lets you bypass the long application process for getting a loan and the process of finding sophisticated investors in the early funding stages. To prepare for a crowdfunding campaign, all you need to do is figure out the online platform that fits best for your venture, share your purpose and message, create a video, and establish some appealing rewards. Many third party portals will help you set up your campaign, so you do not have to worry about doing it on your own.
10. Presale Opportunity: Your campaign gives you the chance to sell your product before it is launched into the market. It is a way to measure and analyze consumer reception and the market to decide whether to continue on with your idea or go in a different direction.
11. Free!! One of the biggest benefits is if you are using an all or nothing platform and if your campaign is not successful, there is absolutely no penalty and set up is free.
Crowdfunding is a great way for entrepreneurs to showcase their ideas, products, and other business ventures, while receiving funding and growing awareness. It is a feasible and affordable process where the audience can give validation or bring new ideas to the table.