The Big Benefits of Crowdfunding




As the famous saying goes, “An active Pre-launch marketing strategy is essential to attain ultimate crowdfunding success”.

What is Crowdfunding?

Crowdfunding is the method in which the entity, generally a company or in rare cases a sole person, pitches a project to the public. All projects require a fixed amount of money to complete. The public supports the creator’s proposal by backing the project with money. There is a time limit, generally, a month for which the campaign generally runs.

Now let’s discuss “The Big Benefits of Crowdfunding”

It’s more efficient than traditional fundraising:

When you’re in an early-stage for setting-up your company and focused on building your business as well as attracting seed capital, you may not be able to afford all the attention and time to pursue the conventional financing demands. Compared to seeking out accredited investors or applying for a loan yourself, setting up a flourishing crowdfunding campaign on fundable or other platform is far more effective and efficient in getting your message out to the correct people. With the right podium, you can tell your business’s story, set up some enticing rewards, produce a quick video, and gain profit from having everything in one centralized place where potential backers can find you.

It’s a prospect for crowdsourced brainstorming to improve your proposal

Hear your would-be backers poking holes in your business plan or asking some tough questions? Take it in pace and accept it as free, crowdsourced brainstorming. The foundation of a start-up is finding some significant and unmet requirement that your consumers have. Therefore, it’s significant to seize any opportunity for client feedback and consider it in planning your start-up. One of the best things about crowdfunding is how close it gets you to your clients, giving you a chance to connect and pitch questions, feedback, complaints, and ideas. You never know—your company’s next innovative proposal could come from someone who isn’t even on your payroll.

It’s a place to build traction, proof, socialize, and corroboration

A strong, as well as visible crowdfunding campaign, can offer social proof and validation that is crucial in charting your trail forward. When potential and prospective customers show interest in your start-up’s service or product, you’ve produced social proof—signifying that other people believe in what you’re actually doing. Once early adopters buy and vet into your proposal, others are more likely to follow suit. The social proof is translated into traction—whether it’s a large number of backers, media attention or pre-orders,—that is invaluable as you pitch to other investors.

It doubles as marketing and media exposure:

Press coverage will create more eyes on your campaign and make lasting brand awareness for your start-up. This can come in the form of a feature story on a popular news station, print publication or blogs, and it is a great way to bring in backers outside of your personal network. A good feature story can create a powerful effect, putting you in touch with key investors. Whether they read about your new product on a popular blog or hear about your pioneering campaign from a friend, successful crowdfunding is a great way to capture new investor interest.

It gains you early loyal advocates and adopters:

The people that power your ideas are your early adopters as well as potential brand advocates. They’re the people who believe in your product, story, or service, enough to stake their money on its durability and long-term accomplishment. These early adopters are important for the success of your crowdfunding campaign and the momentum you keep after closing, to share your vision with friends and family and promote it through their social networking sites.

 

Crowdsourcing has developed into an excellent way for early-start-up companies and entrepreneurs to validate their business, find capital, and get the exposure they require to grow.

To recap, some of the most powerful ways a crowdfunding campaign can help to build more start-up momentum as compared to other financing methods are:

  1. It’s more efficient than traditional fundraising.

  2. It gains you, early adopters and loyal advocates.

  3. It doubles as marketing and media exposure.

  4. It’s an opportunity for crowdsourced brainstorming to refine your idea.

  5. It generates traction, social proof, and validation.

Now the most frequently asked question is “Can a small business get any benefits of crowdfunding”?

You may think only companies with reputation, good status, and renown who have been working in their fields for years and have a large number of passionate consumers or even “fanboys” may expect to run a successful campaign. But not only those sure and consumer-tested entities are getting their projects funded – many no-name or start-up companies’ campaigns are also reaching their goals. Gradually, newcomers are gaining the trust of the backers and get the chance to make their dream project come true. Apparently, those companies get much less investment and need to work harder to get it, but nonetheless, you can still have a fair shot at achieving your target even without large followers, to begin with.

Types of Crowdfunding:

This is a vital question because the four different types of crowdfunding all get lumped under this umbrella term of crowdfunding, but they’re actually very different.

  1. Donation-based crowdfunding

  2. Rewards-based crowdfunding

  3. Debt crowdfunding

  4. Equity crowdfunding

So to summarize…

  • In rewards-based crowdfunding, backers give a small amount of money in exchange for a reward.

  • In equity crowdfunding, investors invest a large amount of money in a company in exchange for a small piece of equity in the company.

  • In donation-based crowdfunding, donors donate a small amount of money in exchange for gratitude and the feeling of supporting a cause they believe in.

  • And in debt crowdfunding, lenders make a loan with the expectation to gain back their principal plus interest.

Crowdfunding can help whether you’re looking to fund your project, prove a concept, share your proposal or bring significant change to the world.

 



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