What is crowdfunding?
Crowdfunding in India is a relatively new concept hence the concept is not clear to everyone. The term crowdfunding is used to describe the process of asking people, typically investors, to invest in a business project. Crowdfunding is the process of funding a project or business by raising capital from a large number of people. Crowdfunding differs from traditional fundraising methods in that it is not focused on one particular goal but rather on a campaign to raise funds for any purpose.
What is business crowdfunding?
Business crowdfunding is an extremely popular way of raising money for small businesses and startups. Business crowdfunding enables small businesses to tap into the world's largest crowd to help them achieve their goals. Businesses can use crowdfunding as a means to raise money or as an alternative way to approach venture capitalists who may not be interested in investing in their business idea. A company can also use crowdfunding as a way to gauge interest from potential customers before spending much time and energy on marketing efforts.
What are the different types of crowdfunding?
The most common types of crowdfunding are
- equity-based crowdfunding: where investors receive ownership in exchange for their investment
- debt-based crowdfunding: where investors provide money to purchase debt instruments such as loans or bonds
- rewards-based crowdfunding: which involves giving projects that are expected to generate rewards with no return.
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What are the advantages of business crowdfunding?
1. Free Exposure
The first advantage of business crowdfunding is increased exposure. Crowdfunding sites like Kickstarter and Indiegogo allow you to reach a larger audience than your local customers or existing suppliers. By sharing your business idea or product ideas with the public, you may get some valuable feedback on how to improve it or find out if the people like the product. You also get to validate your strategies. For instance if you performed target costing to find a good price point, you will know from the reviews of the public in the crowdfunding campaign that whether your target audience is fine with the price point.
2. Low-risk huge gains
Crowdfunding can be a low-risk way for someone who has an idea for a product or service but doesn't have enough money to develop it. By using crowdfunding, you're able to create a prototype and test it with potential customers before investing more money into the project. If it's successful, you may be able to move forward with production and distribution. You can use the crowd-funding platform to raise money from people who want your product or service, and you can use the money to create prototypes or even launch your product.
3. Community Building
Crowdfunding is a great way to build a community around your brand. You can reach out to people who are interested in what you are doing and give them a chance to invest in it. This creates a network of people who support each other, share ideas, and help each other out. It's a great way to start building a community around your business that can last for years to come.
4. No need to give up equity in your Company
One of the biggest benefits of crowdfunding is that it allows founders to avoid giving up equity in their company by offering equity-free funding options. When you're trying to raise money from investors, they have an incentive not to invest if they think they'll be getting shares of the company as compensation. This means that founders will only have to give up equity if their investors insist on it and/or if they don't get enough money by raising traditional capital from angel investors or venture capitalists. With crowdfunding, you don't have this problem because there's no such thing as “equity” with crowdfunding campaigns!
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