Crowdfunding has fast become the champion of the alternative finance market. Many start-up entrepreneurs and small business owners are seeing the benefits of this vehicle to funding and reaping the rewards successfully.
However, some are still wary of it as a viable source of investment, but it may be worth a second look.
Should you crowd fund for a start-up business?
Access to capital
Obviously, the most prominent plus when it comes to crowdfunding is the cash.
Many new business owners are intimidated by the false prospect that banks, investors and venture capitalists are the only access to funding. While this may have been the case in years gone by, things like crowdfunding are now shaking up the status quo.
No debt! Hooray!
Another mega advantage with any funding acquired through crowdfunding is that you won’t need to pay it back. Some types of crowdfunding mean that you won’t even have to give away any equity.
Most crowdfunding campaigns run on the basis of large numbers of investors making small investments. Unless they’re doing it out the goodness of their hearts, you’ll need to think of what rewards you can offer in exchange for this investment. For example, if you sell a product, they could receive a free one for their investment. It’s a bit like you’ve made a sale, but at sale price!
Valuable market research
Exposing your business to a large audience through crowdfunding enables you to gather insight around who’s interested in what you’ve got to offer. It’s a great way to test the waters and gauge if you’re successfully plugging a gap in the market.
Powerful (but cost-free) marketing
Throughout the course of a crowdfunding campaign, your brand will be being exposed to countless people. These people will most likely be your target demographic if they have engaged with the campaign. Getting your product or service in front of their eyes is invaluable.
It’s a free and easy means by which to increase brand reach, drum up social media traffic and gain some healthy web referrals along the way – not to mention the associated word of mouth marketing.
Gives your concept credit and street cred
Should your crowdfunding campaign prove to be a resounding success, this will add some serious clout to any pitches you carry out in the future.
Prospective investors or partners will look at the reception of the campaign and (hopefully) think, ‘wow – this is something I need to be getting involved with’. If they can see people have engaged with the idea, product or service then their interest will be peaked.
You can gather priceless feedback
Opening up your project to the masses will give you access to constructive criticism and educated opinions which will be invaluable in the development of the venture.
With these pearls of wisdom, you can then adjust your strategy going forward. Perhaps it highlights something missing from your marketing strategy or a potential investment tactic that you hadn’t thought of previously.
Have you had experience in crowdfunding for a start-up or small business? We want to hear your stories! Share them in the comments below or come and join the conversation over on Twitter or Facebook.
Alternatively, if you’re looking for some support with your small business finances, get in touch with our team of qualified accountants on 020 3355 4047.