Crowdfunding For New Or Existing Business Idea – Does It Still Work?

Out of the many ways by which you can raise money for your business idea or new project, crowdfunding appeared to be latest option. Crowdfunding is very effective at giving business owners, especially start-ups access to a pretty large number of potential investors within a short period of time.

Although crowdfunding has been in use for commerce and marketing existing products and businesses, a recent survey revealed that only about 2% of business used a crowdfunding platform for their business.

The most common reason highlighted for business owners not using crowdfunding is the fact that how crowdfunding works is not a common knowledge and so people lack the understanding about this method of raising money for a particular project.

What Exactly Is Crowdfunding?

In a traditional way of looking at it, crowdfunding is the method of raising some amounts of money for the sake of a project or business from a large group of people. Business owners use crowdfunding to improve efficiency and cut cost with their suppliers.

Online crowdfunding helps to bring people who are interested in investing in your business together. This also save you time that would have been spent on seeking out investors. Instead of you being the one to seek out potential investors, they would be the ones to come to you online. The fact that crowdfunding is right for your business depends on how you look at the pros and the cons from your own point of view.

Although people use crowdfunding to raise money for anything from paying for someone’s dinner to space missions, this guide concentrates on how you can use this platform to fund your business.

Crowdfunding allows thousands of people to pledge money in support of a project or company. Typically, the amount of a total budget might be difficult to get from an individual investor, but with crowdfunding, you will be able to get more, as lots of smaller investors all join together to help you reach your goal.

Crowdfunding websites allow companies and investors to meet and interact. In exchange for the donation from the masses, companies provide something in return. Interested investors then pledge cash in support of the project.

Does crowdfunding work?

Yes, if you know what you are doing. Crowdfunding now has lot of popularity. This is not only because of the ease that comes with setting it up with the technology of today, but also because it has a lot of success rate.

This is another big tactic that can be used by small businesses owners that wants to get their business running really fast or take it the next level. There are many factors contributing to the success of crowdfunding.

Success Rates of Crowdfunding

Several people start the process of crowdfunding campaign without properly preparing for it.The evidence of the popularity of crowdfunding is shown in the Kickstarter reports, whereby over 200,000 reward-based projects were started in just last year.

However, this report also revealed that only about 40% of those projects were able to receive funding, without counting around 20% of rejected projects by Kickstarter.

However, when you consider the benefits of crowdfunding, 30-40% is still a decent number.

Statistics further shows that the campaigns that are failing is as a results of people’s lack of proper knowledge when it comes to keep them going. It is not really because crowdfunding does not work.

Crowdfunding Benefits For Your Business

Apart from raising money, there are other different reasons why people start projects. However, when it comes to getting direct feedback from the public, and improving an existing or new idea, crowdfunding for business is one of the best ways. This is even more effective when it comes to a very innovative business idea that people love, where they would also get to enjoy the products for free, such as the case of Jewellery Bra Straps for strapless bra on the one of the most popular crowdfunding platforms- Kickstarter.

This way, a business can save tens of thousands of dollars. A business owner will be able to test for public demand of his product before deciding to have them rolled out to the public and provides a proof-of-concept.

Sometimes, business owners also make use of a crowdfunding campaign as a marketing tool. Crowdfunding campaigns have ways of going viral and getting rapidly shared on social media platforms by millions of users.

However, the phenomena of the popularity of a crowdfunding campaign are generally unpredictable.This is why crowdfunding campaigns have to be carefully crafted.

Featuring expensively produced videos or celebrities in a crowdfunding campaign can end up being flopped while as surprising as it might sound, campaigns with simple concepts can end up becoming overnight sensations.

After the Campaign

A successfully funded campaign has more benefit than the money realized. The benefits extend beyond the formal end date of the campaign. A successful campaign comes with a sense of market approval.

This further enables and makes it easier for new businesses to seek for additional funding, besides the initial crowdfunding campaign. Also, as the funded enterprise grows, it will still continue to enjoy a sense of community, which has been built by passionate backers right from the time the campaign begins.

Author:. Adeyemi Adetilewa is a digital marketing strategist who writes for publications. He's the Founder and Editor of Ideasplusbusiness.com, an online community for entrepreneurs to share business ideas. His one word is #possibilities.
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