Investor funding and capital

Crowdfunding For Your Startup: Fueling Your Dream Into Reality  Promo

Elizabeth Hill

The traditional method of financing a business used to be applying for a bank loan, self-financing through small-scale borrowing or finding investors.

Now, thanks to the rise of crowdfunding platforms that give new business entrepreneurs the option to simply ask the public at large to contribute to the costs of building a startup, things are considerably different. In some respects, they are easier. In others, they are somewhat more difficult.

Crowdfunding For Your Startup: Fueling Your Dream Into Reality

How Crowdfunding Works

Setting up a crowdfunding campaign is relatively simple. The business or entrepreneur sets a funding goal and offers rewards for individuals to contribute in various categories from small amounts up to larger amounts.

Crowdfunding can be thought of in two ways. One, it is a business offering products for pre-order. On the other hand, it is contributors investing without obtaining equity. People who contribute to crowdfunding campaigns are generally more interested in seeing the vision become a reality than they are in owning part of that vision.

This is what fuels the desire to buy a product that hasn't been created or manufactured yet. Many contributors feel they are a part of something unique and special if they buy on the promise that product will soon be released.

What Businesses Can Expect

As a fundraising strategy, crowdfunding has been a spectacular success. Crowdfunding platforms like Plumfund have raised tremendous amount to support everything from worldwide travelogues to video games to weddings.

Although it may seem like this is a rather simple way to obtain large sums of money, there are some catches. Contributors will expect to have their rewards delivered in a timely manner. Also, since the business launching the campaign must announce their goal, the contributors will expect that goal to be reached and also to deliver everything the business promised.

What Kinds of Businesses Can Use Crowdfunding?

According to Business News Daily crowdfunding on larger sites isn't always guaranteed, so it is always a good idea for any entrepreneur to do their homework before starting a campaign.

Crowdfunding works best on projects with a well-defined goal. Products like video games, films, books, manufacturing prototypes and so forth are very easy to announce as complete. Projects will less well-defined finish lines are somewhat more difficult and often require a bit more work.

While crowdfunding is by no means a universal solution, it does provide a fair amount of flexibility and power for entrepreneurs that don't fit neatly into the criteria for other funding sources. It is well worth a few minutes of research and consideration for most businesses.

I create beautiful, powerful and useful content. Business, human resources, finance, travel, health and lifestyle are my niches.

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Comments (1)
Crowdfunding is revolutionising how we market and raise capital. It encourage transparency and trust in a global economy where information asymmetry has caused a massive imbalance of power.

The crowd marketplace model is now being deployed across various sectors to encourage the same growth opportunities. Just look at what Uber has done with the taxi game or AirBnb with the accommodation sector.
Alistair Lamond Owner at Skippr Cash Flow

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