Growth is fundamental to business, but growth requires capital. Instead of bootstrapping or finding angel investors, some business leaders have turned to crowdfunding to finance new ventures and products. If used well, crowdfunding can leverage the power of a distributed network and help you find the capital–and reach–to grow your business.
What is Crowdfunding?
Unlike traditional investing, which is usually limited to a few investors, crowdfunding relies on a broad network of people–a crowd–to fund a product or business. Typically, a crowdfunding campaign relies on an initial pitch on a crowdfunding platform, followed by a fixed time window to reach a target funding amount. If the campaign is successful, the product or business is launched. Later, investors are rewarded through rewards like early or special access to the product or service, company equity, or investment repayment with interest. The funding is usually returned to the investors if the campaign is unsuccessful.
How Can Crowdfunding Help Your Company Grow?
Crowdfunding has the advantage of being low risk, both for you and your investors. Generally, all you need for a crowdfunding campaign is a well-developed pitch and possibly a prototype product, which requires minimal investment. If the crowdfunding campaign is unsuccessful, everyone simply walks away. However, if a crowdfunding campaign succeeds, you can raise capital while building a customer base, honing your marketing, and testing product features.
How Can You Effectively Use Crowdfunding?
Here are some strategies to make sure your crowdfunding campaign succeeds.
- Study successful campaigns. Spend some time with successful crowdfunding campaigns, and notice what they have in common. Copy those elements for your campaign.
- Talk to your investors early and often. Since the crowdfunding window is often tight, don’t wait to alert your network about the campaign. Tell them as early as you can, and keep reminding them–you want them ready to jump in as soon as the virtual doors open.
- Tighten your pitch. Since crowdfunding is minimally risky and crowdfunding pitches are comparatively easy to put together, the market can be saturated. That means your marketing must snap if your product or business is to be noticed. A crowdfunding campaign is no place for sloppy prototypes, weak copy, badly-lit photos, or boring video footage.
- Keep the conversation going. Communicate with your investors throughout the campaign. Solicit feedback about key products, product features, or offerings. Use the campaign to test and develop your product/business and customer base.
- Follow through. Whether successful or not, follow through with your investors when the campaign ends, and alert them of the next steps. Communication is key to building and maintaining trust.
Keep crowdfunding in mind as you consider funding sources for your product or business. If you have a strong pitch and a real problem to solve, you can inspire your future customers to buy into your ideas early–and gain the capital to develop them simultaneously.
DISCLAIMER: This article was written by a third party contributor and does not reflect the opinion of Born2Invest, its management, staff or its associates. Please review our disclaimer for more information. This article may include forward-looking statements. These forward-looking statements generally are identified by the words “believe,” “project,” “estimate,” “become,” “plan,” “will,” and similar expressions. These forward-looking statements involve known and unknown risks as well as uncertainties, including those discussed in the following cautionary statements and elsewhere in this article and on this site. Although the Company may believe that its expectations are based on reasonable assumptions, the actual results that the Company may achieve may differ materially from any forward-looking statements, which reflect the opinions of the management of the Company only as of the date hereof. Additionally, please make sure to read these important disclosures.
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