Crowdfunding has created a real buzz in the start-up scene and shaken up the alternative finance market. A quick Google search and you’ll be presented with a host of platforms ready to help you fund your business. From Crowdcube and Seedrs to Indiegogo and Kickstarter, crowdfunding is now more popular than ever with a host of platforms tailored to your needs.
Platforms, however, are different in the sense that some allow companies to offer equity in their business while others are reward-based. Crowd cube and Seedrs are equity-based while Indiegogo and Kickstarter reward funders with perks.
But regardless of the platform, crowdfunding is more than just raising finance. Here are five reasons why…
It’s the perfect market tester
Crowdfunding gives entrepreneurs the chance to test their idea by conducting risk-free market research and product validation, to help refine the product-market fit. By creating a campaign and reaching out to people, you’ll soon know if your product has potential or not. You can get your idea out there without not putting a lot of money into it, and if people want to buy into it, they can.
You’re testing the market and it’s a great way to put yourself and your idea out there, and see if people are interested. But remember, people fund people as well as the idea, so it’s important to put time and effort into the video.
Create a legion of fans
One of the main reasons crowdfunding is popular with early-stage start-ups is because it gives small businesses the opportunity to find traction and get their brand or project known. By launching a campaign, there’s a chance to build a community of people who share the same passion and believe in the product so much that they’re willing to invest even before it exists.
Crowdfunding gives both customers and consumers the chance to be part of an exciting start-up journey. The advantages of crowdfunding at launch is that you immediately have a group of people who support you and know about what you do.
Target specific markets and customers
Crowdfunding platforms allow entrepreneurs to reach out to specific and relevant audiences. For example, Indiegogo categorise their ongoing campaigns into relevant sections so their users can find projects easily. Varying from food and music to technology and religion, the categories allow entrepreneurs to target specific markets and give its users the chance to fund exciting start-ups.
By using the platform, users can also capture data against the target demographic and get insight into who is resonating about the product. Even better, this can usually be done within 45 days of launching a campaign, which it’ll give a rough idea as to who is interested in your brand.
You’re reaching out to the ‘crowd’, a community of potential customers who are willing to give feedback.
Funders become part of the journey
When it comes to Indiegogo and Kickstarter, a huge part of a crowdfunding campaign is the perks that are offered to funders. People will fund you for a variety of reasons, but often with products, they want the perk. This gives entrepreneurs an opportunity to be creative and a chance to create momentum with customers.
But regardless of the platform, funders become part of the journey by investing in the business – whether they’re rewarded with equity or a perk.
It’s different to other ways of raising finance
Crowdfunding is different in many ways to traditional finance models. A key difference is you’re reaching out to the ‘crowd’, a community of potential customers who are willing to give feedback, rather than a small group of investors or a bank.
Crowdfunding allows you to target specific audiences, rather than a business brain who might know if your business has potential or not. No bank or investor can tell you what the customers want.
Another key difference, as mentioned above, is it allows you to test the market while seeking finance. If your idea is good enough, you’ll not only have the funding you’re after but you’ll also have a legion of fans who’ll rave about your brand.