“Crowd-funding provides a final, persuasive link in the crowd-sourcing argument.” – Jeff Howe
Simply put crowd-funding is asking a ‘crowd’ of people to invest a defined sum of money to fund a particular project or venture in exchange for some rewards or returns. This concept is gathering momentum due to the novel idea of reaching out to thousands of potential funders to contribute small amounts rather than asking a few to contribute large amounts. This is changing the traditional method of raising money for start-ups or small businesses.
Prior to the crowd-funding concept innovative and creative ideas by small business owners were being turned down given the risk of hitherto unheard of ideas. Small businesses are now getting a fair chance to showcase their ideas to a larger audience with a greater chance of funding success. Crowd-funding also benefits small time investors who can reap the dividends by funding these start-ups. Although this concept has its challenges, in trying to balance – protecting the investors from losing money with the business creativity of new ventures to be successful – it can also be a fantastic way to gain visibility, validate your business and grow your customer base and many more such benefits of crowd-funding that we shall discuss in detail.
In the traditional methods of raising money / receiving funding more time and effort is required and with the fast pace of business, companies cannot afford to waste either. The internet is a blessing for those seeking funds – there are many highly visible platforms on which companies can put up their crowd-funding request campaign. This one ‘message’ will be available for a large number of the target audience and hence the need to reach out to each one individually is done away with. A company’s crowd-funding campaign can be made extremely attractive and alluring using modern technology and complete details. With all the information in one place, it is simpler for investors to make quicker and more informed decisions.
When a company is transparent and open through the campaign, more investors will express their interest. This provides a firm footing and social validation for the company. As potential investors show their eagerness in your newly started company, others are more likely to be interested too. Through the well-done crowd-funding campaign the company gains visibility and social media attention that proves invaluable in garnering support and landing the required funding for their company.
Some may believe that the downside of a visible crowd-funding pitch is that there would be many detractors and people who would criticize the idea. There could be some harsh feedback from customers – the fact is that opinions, views, feedback and any kind of comment to any campaign is always good news. These comments provide your company and crowd-funding campaign with the necessary learning opportunity and give you a chance to understand the customer and market mind-set a lot better. As we said earlier, it is important to deal well and cleverly with criticism – it is an inevitable part of life and business. In fact your crowd-funding campaign puts you in closer touch with the market and your customers – you can engage with them and could get some great ideas that could immensely benefit your company in the long term. So much publicity and suggestions – all for free!
The other people who comment positively and show their appreciation for your crowd-funding campaign are the ones willing to pump funds into your endeavor and commit to its long term success. These people are the ones who would be able to keep up the momentum of your crowd-funding campaign and would be very willing to spread the word about it through various channels and in their close network.
A well-done and executed crowd-funding campaign can gain wide exposure for your company in the press too. The more attention you can draw towards your campaign, the more awareness and interest you can build in your company and brand, the better the results of the crowd-funding campaign. As the ‘news’ and visibility of your campaign spreads, there is every possibility that investors who you may not even know of could see and express their interest in your company’s proposal. A crowd-funding campaign spread through this medium, is therefore a great way capture the attention of new ‘audience’ and further the cause of your company by validating the business and finding the kind of capital required to help it grow.
The other benefit of a crowd-funding campaign is that a company can raise funds, contrary to belief, outside of the circle of the ‘known investors’. In fact crowd-funding is an alternative to the traditional methods of funding and it is possible to gain the funding without piling up debt. There is donation crowd-funding that happens when the campaign appeals to the creative side of investors who will donate sums of money because the project is something they feel close to. The rewards are non-monetary and in kind like maybe the signed copy of a new released book with the names of the investors in the credits or other such tangible benefits / rewards.
A newly set-up company faces many and different kinds of risks – starting from lack of sufficient funding to unforeseen upsets and market conditions and business ‘sharks’ who would try to ‘swallow’ your company while offering to help it ‘take off’. With crowd-funding these risks are largely put to rest as the capital received from different sources is sufficient to help the company move forward and with many people involved, the risk of malicious behavior is curbed.
A crowd-funding campaign is your company’s chance to become known widely that too without extra effort or funds. Almost all the channels that support crowd-funding campaigns would also be connected with social media sites and would allow the sharing of the campaign on these sites too. This is therefore a great way to get high visibility and receive ‘attention’ from a number of site visitors, many of whom could potential investors. These ‘visitors’ in turn could also forward the campaign to people they know, increasing the reach of your crowd-funding campaign.
The other great part of crowd-funding is that through the high visibility, a company can immediately gain validation from those that matter and the business market as a whole. In the nascent stages of any business gaining so much visibility and social recommendation is almost impossible but with crowd-funding this becomes possible and with lasting impact. Investors are able to see the support the crowd-funding campaign garnered, which will prove to them that people believe in the overall concept, which leads to trust and confidence, which are solid pillars for any business relationship.
Even as the discussion continues, there is no denying that now and in the immediate future, crowd-funding is set to redesign and reform the environs of entrepreneurship in an extraordinary way. It is a great way for ‘new business owners’ to receive the funding and exposure they need in order to grow their business. Crowd-funding began as an experiment some years back – it has now taken on massive proportions and is now held as a great tool to help new and other business ventures set out on the path to success. Statistics has revealed that over $1.5billion has been raised through crowd-funding to help just ‘born’ and tottering ventures find their feet and also help them through their journey.
