If you are not familiar with this increasingly popular trend, crowdfunding is widely described as a group of people donating, lending or investing towards a cause via the internet. Crowdfunding is commonly used to support charitable causes, local community and eco-technology projects. Within the business world, many companies crowdfund in order to collate small amounts of capital from large groups of individuals and help finance a new business venture. Start-ups in particular, can make use of the easy accessibility of big networks of people via social media channels and crowdfunding websites to promote their venture and expand their pool of investors beyond that of friends and family.
The first ever internet-based crowdfund took place in 1997 when fans of the British rock band Marillion underwrote and entire US tour, raising $60,000. Plus, it was the fans, rather than the band, which initiated the fundraise!
So, what exactly are the benefits of crowdfunding for business?
It saves time…
If you are currently in the research phase of starting up your own business venture, you are starting to realise that securing funding for your business can be quite a challenge. Identifying potential investors is a laborious, time consuming and often, thankless task. This is exactly why so many small businesses turn to crowdfunding for the support they need. Don’t be fooled, putting together a solid crowdfunding campaign will take time, but you will only need to make your pitch once in order to potentially reach a mass of investors. Choosing the right platform is crucial, we will come to that later.
Sense checks your plans….
Avoid being one of those entrepreneurs that has all the great ideas but no idea how to back them up with proof that they will actually earn their business a profit! You might not want to hear it but finding out at an early stage that your idea isn’t going to cut it within your target market is better than after you’ve poured a ton of blood, sweat and tears into developing it. Crowdfunding allows you to sense check if what you are planning on selling is actually attractive to your market. If you’re asking your target audience to validate your concept by putting their money behind it from the off, then they will not be shy in saying no if it is not for them.
Plus, you get invested feedback too, which will be extremely valuable to your business. Potential investors will become genuinely invested in your business too so they have an entrusted interest in your success and will undoubtedly provide great insight and hopefully some great ideas for you to take on board.
By gaining some validation from your target audience, crowdfunding will help you feel more confident about the potential of your business idea. Reassurance is like gold dust when venturing out on your own and if you can demonstrate a willing market for your product, you’ll also look much more desirable to other revenue sources.
On top of all of that, crowdfunding is a marketing tool in itself. It will help you spread awareness about your brand to a wider audience and will save you money on advertising, particularly in the pilot stages of development when money will likely be extremely tight.
What is the best crowdfunding software platform to use?
Nowadays, there are many software platforms to choose from with new ones emerging daily. Deciding on which crowdfunding platform is best suited to you and your business is important, and you need to be wary of a few things like how much the commission fees are. Business.org have selected the best crowdfunding sites around at the moment (out of the 600 currently operating worldwide), to help you find the right platform to kickstart your start up into business.
Don’t forget, the team here at Bells Accountants are experts in advice for start-ups. If we can provide a listening ear at any stage, please give us a call. We’d love to help.