We present some useful information and advice for entrepreneurs who are interested in crowdfunding.
What is crowdfunding?
Crowdfunding is a way of collecting funds for a project or enterprise. It allows entrepreneurs to gain money for development if potential clients think their product or service is worth their money and attention. Crowdfunding is also used for charities. There are different types of this process – it can be a simple fund collection where people who financially back the author get to support a project that aligns with their vision of the world or receive a gift for their help; it can also be a little more complicated process that includes equity shares or equity tokens. The latter is a form of investment where the person supporting the project financially in the initial stage of its existence is expecting to receive a return on said investment. For that to happen, the project that has collected funds has to become profitable.
Why is it good for businesses?
If a project’s authors wish to remain true to their idea and not “sell-out” to a venture capital company, crowdfunding must be the best option for their business model. It attracts people who think like the creators of the project. The author does not need to compromise their ideas or values when selling it to a big company that will have the final word in any discussion about the project. On the other hand, if investors are engaged in the business, the author might get a lot of constructive feedback from the community around the project – as they all wish for the project to be very successful. This way, the founder of the business gets to implement their dream and gets immediate feedback from people who wish that the project will work out – motivating and inspiring!
What businesses should use crowdfunding methods?
As it is a form of grassroots economy, usually the ones looking for this kind of backing are new to the market, so a good example of a business that might find this method useful is a start-up company that is yet to establish a tight community of supporters. Individual artists and creators who have not supported by big venture capital or any other company. Those who wish to secure their originality are the target users, too. If one wants to engage in this kind of operation, one should look up crowdfunding platforms that best suit their preferences – there are more general ones and some that are very specific. Each of them has its perks and cons – make sure you decide the one that will make your product available and attractive for potential supporters.
What are some good tips for people who want to try crowdfunding?
If you’re a person looking to raise money via crowdfunding. Then you should carefully choose a crowdfunding platform and its guidelines (see the platform fees, for example – is the website ripping you off? or is there a soft cap for the collected funds?). Moreover, you should remember that for crowdfunding to be successful, you will need some effective marketing strategy to attract investors. And that once you have backers, it’s important to nurture a good relationship with them. Maybe they will also back your future projects?
And, on the other hand, if you are an investor. It’s important to see what kind of guarantee you have for the return of your investment. As well; is there any way to monitor how the money you donate to the author has spent. For example, a tokenization economy that uses blockchain explorer technology is a safe and effective way to do so.
Either way, before making an investment or starting a fundraising campaign for your own business. You should do extensive research on the subject and make sure every decision. You make along the way is well thought-through. Good luck with your financial management and visionary projects!