4 Ways Crowdfunding is Transforming Startup Finance

4 Ways Crowdfunding is Transforming Startup Finance

Crowdfunding offers startups many unique advantages over traditional forms of financing.

This helps explain the incredible growth in crowdfunding in recent years. In 2015, it is estimated that crowdfunding provided US $34.4 billion in launching new businesses, up from 2.8 billion in 2010.

Among the many benefits offered by crowdfunding which has resulted in its amazing growth in recent years, this article considers 4 key advantages – including the simplified process, the valuable feedback, the reduced risk, and the targeted marketing.

Simplified Process

Traditional forms of financing require entrepreneurs to prepare tedious amounts of documentation in order to apply for loans.

Often, this complicated process deters would-be entrepreneurs in realizing their dreams. But crowdfunding is a much more user friendly.

Crowdfunding platforms enable you to access funds as well as tell the story of your business, provide a promotional video, and highlight rewards for investors conveniently and all contained in one place.

We all know that starting a business requires lots of hard work. And there are countless demands on our time every day, with too little time to complete them all. When it comes to preparing documents needed in applying for startup finance, easier is better for busy entrepreneurs.

Less time spent on paperwork leaves more time to focus on the core aspects of the business, including fostering relationships with customers, creating marketing strategies, and improving the production of products.

Less time spent on paperwork leaves more time to focus on the core aspects of the business.

Valuable Feedback

It is important to raise capital for your business in the early stages of starting your business.

During this time, ideas and feedback regarding your business plan are extremely important. This is even more true concerning the valuable feedback offered by would-be investors, as these people serve as wonderful constructive critics of your business idea.

This is an incredible source of constructive input for your business at a time when it needs it most. This also serves the dual purpose of fostering important relationships, which can add future value to your business.

Remember, would-be investors that provide you feedback care enough about your business plan to warrant them spending their time giving ideas on how to improve products or your business plan. These are the perfect potential customers for you to focus on developing relationships and forming business contacts.

Would-be investors who care enough about your idea at this early stage provide the perfect opportunity for you to foster relationships, improve products, and make some early sales by turning these critics into early adopters of your products.

Reduced Risk

There are many risks associated with the launch of a new product.

Traditional financing options, while extremely complicated and time consuming, also impose the full responsibility of possible failure on the entrepreneur. The entrepreneur is accountable for the success of the company.

Of course the founder of a company is always responsible for the success of their business. But crowdfunding mitigates some of the personal risk involved for the entrepreneur.

A crowdfunding campaign helps validate the market for a new product. If there is a sufficient market for the new product, investors are likely to contribute. If the idea features high uncertainty, or there is not adequate market potential for the idea, investors will not risk their capital.

Neither the founder of the company nor investors need to blindly invest their life savings in an idea that may be doomed from the start.

If the crowdfunding campaign isn’t successful in reaching its targets, all investors get their money returned and the crowdfunding creator has avoided investing their money and time for nothing.

If the crowdfunding campaign isn't successful in reaching its targets, all investors get their money returned.

Targeted Marketing

A crowdfunding campaign is a wonderful way to introduce your product and your company.

Not only is crowdfunding a virtually free marketing channel to promote your product and vision, but it also reaches a diverse consumer base.

Also, many crowdfunding platforms integrate social media sites, which makes it amazingly simple to share information across platforms and gain advantages of viral marketing.

Conclusion

The rapid development characterizing today’s world extends to startup finance.

Recent promotion of capital mobility provides a legitimate opportunity to realize the advantages of crowdfunding in launching any new business.

So no matter where you are or what exactly your business idea is, be sure to consider crowdfunding in getting your business started.

  • June 28, 2018