What is Crowfunding?

/, Business, Finance, Startup, Strategies/What is Crowfunding?

A lot of businesses don’t really prosper because they don’t have enough money to operate. Let’s admit that the success of a business still depends on how well funded it is. Today, there are different options on how your business can get funded. One of the best ways is to have it crowdfunded.

Crowdfunding is a relatively new concept. Instead of going after corporations and billionaires for funds, you go directly to the common folks. Crowdfunding is done usually online. It is a way to fund bright ideas. What’s in it for people who supported the venture? It depends on how much you provided the company. There are instances when you can pre-order the product. There are also times when you simply contribute and get nothing in return.

How to get crowdfunded?

If you think that crowdfunding is easy, think again. Before you start to use a crowdfunding platform, it is always a good idea that you first look into your idea. Is it really a bright idea that can attract a lot of people? Most of the time, businesses with mediocre ideas don’t get funded this way.

It is also important that there is a validation of your concept. This is the reason why a lot of crowdfunded projects first develop a prototype and then film it. Typically, these are the inventors who market and present the products that they have developed on social media, newsletters, and other channels online.

Provide a compensation for their help. It is always a good idea to be thankful to your investors. No matter how small their contribution is, it is a must that you say thank you to them. Whether it is in a form of email, or the actual product itself, it is important that you give investors something in return.

What are the benefits of crowdfunding?

There are many benefits to this kind of option. One, you don’t have to beg the banks and other financing instruments to fund your idea. As long as you have an audience that is willing to listen to your concept and products, there is always the chance of getting crowdfunded.

A lot of inventors do not have the money to show to banks in order to get financed. Going after crowdfunding option eliminates this concern. You can get the money you need to turn your idea into reality even if you don’t meet the typical requirements of the banks.

Also, those who get their funds from crowdfunding experience less pressure than those businesses that have corporate investors behind them. Typically, companies that have paid a large chunk of money for the continuation of your project may end up controlling the creative process of your project. Also, it typically ends up that the corporations get a share of your company. For a startup, this might sound like a good idea, but in the long run, it may not be that smart.

Should you explore crowdfunding option if you lack funds for your business? The answer is both yes and no. You should stick to this option only if you have a game changing idea. If not, you can always seek the conventional methods in financing.