CrowdFundBeat News, With a business idea in hand driven by passion the challenge has always been how to raise the finance required and crowdfunding has now become the route for many start-ups and entrepreneurs. Since the last recession the ability to raise money has become harder due to the change in regulations, risk aversion and general market uncertainty proving that the internet now provides a platform where the masses can reap the benefits of investing in small business and start-ups.
Crowdfunding is a new concept in raising money and in itself going through a learning curve based on refining the risk to the investor and their potential rewards. For those type of investors that like the idea of a gamble with a long term reward or the thought of being involved in something that is close to their hearts it is an exciting prospect for many and gives small businesses and stat-ups access to funding opportunities like never before.
The process of crowdfunding is normally based on a type of campaign. Through the process of conducting a crowdfunding campaign, the additional benefits while trying to source investors include pre-orders of the product or service, or a significant amount of media interest. Generating interest is an important step in driving success and developing the collateral for the investors pitch.
Features and advantages of crowdfunding
Awareness of the company, start-up or business proposition supports in generating successful crowdfunding. Media coverage will generate more interest on the campaign and bring in backers outside of the personal network. Media coverage could include a feature on your company in a popular news station, blog, or print publication.
Investors are interested in ambitious entrepreneurs whose ideas have created following and social trending.
Crowdfunding validation and marketing
A start-up or small business needs to reflect confidence in the success of their product or service to gain investors and develop the growth of the crowdfunding campaign. One of the biggest challenges for small businesses and entrepreneurs is to be able to cover all the holes that a venture might have in it’s early stage. By having a crowdfunding campaign, the entrepreneur has the ability to engage with investors receiving comments, feedback and ideas that enhance the venture.
Investors will often ask for proof of concept, plans and business models to gain credibility and convince them that the venture will attract others and drive a successful crowdfunding campaign. In presenting the background and steps taken so far in developing the crowdfunding campaign feedback is extremely valuable, as it can help in understanding some aspects of their business that were previously un-thought of or may add clarity for future investors and could potentially inspire some other ideas. This approach reflects a process of validation being able to gauge user reaction and analyse the market in order to decide whether to pursue or pivot on a given concept.
From an internet marketing perspective success stories encourage interest bringing together the media by way of news, blogs and videos and crowdfunding is a unique and hot industry topic these days, and countless entrepreneurs have been successful due to the exposure created.
Crowdfunding and social media
Many crowdfunding platforms incorporate social media mechanisms, making it painless to get referral traffic to websites and other social media pages.
When potential investors show interest in start-up’s product or services, they generate social trends, influencers and traffic that essentially reflect a positive outcome to driving a crowdfunding campaign.
Typically, this allows ventures to receive organic visits from unique users and potential investors. These users are also important for viral marketing, as they have the ability to share and spread the word to their connections. Social media channels become a platform to share the message and establish early adopters.
Early adopters are very important to every business, as they will help spread the initial word without asking for anything in return. Such people care about the venture’s brand and message, and are likely to be loyal customers throughout the life of it.
Crowdfunding reduces complexity with no fees
Rather than the original methods of applying for a loan or pursuing other capital investments crowdfunding while still needing the rigger in building the concept of the business the process in its self is less complex.
The application process for crowdfunding is based on contacting their chosen crowdfunding platform that best suits their campaign theme and purpose, share their venture’s powerful message, make a video, and establish some attractive rewards.
Crowdfunding focuses on targeting success in that you only get the funds raised if you reach 100% or more of your funding goal. If the target funding goal is not met there is no penalty and all the funds are returned to each investor with the business or start-up not receiving anything either. On the other hand, if the crowdfunding campaign is successful, everyone wins and gets to be a part of a successful crowdfunding project. When successful, the average commission for the platforms is around 5% of total funds raised.
Crowdfunding dreams into reality
In essence, crowdfunding is not only an alternative approach to raising finance but is an excellent way for entrepreneurs to receive the financing and exposure they need in order to verify, execute, and help their ventures grow. What originally sat on the back of social media has now become a social media success story in its self, validating a viable platform that is increasing in efficiencies while simplifying the funding process and support business growth.
Crowdfunding having raised over $1.5 billion; there is no better time than now to take advantage of the associated benefits and support in turning business dreams into reality.