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Published On: Fri, Jan 10th, 2020

How Startups Can Leverage Crowd Funding

Crowdfunding is a concept that consists of raising money for a startup through online platforms such as Kickstarter, GoFundMe, Kabbage, and Patreon. For entrepreneurs that have a startup business, this is a great way to get the funding needed to support the business needs by attracting advocates that are willing to invest. It also allows companies to validate and gain exposure in the community.

Image/bykst via pixabay

Crowdfunding comes in many different categories. The main types typically used are:

 

  • Donation crowdfunding – Donation crowdfunding is when people donate funds with expecting a return.  

 

  • Reward-based crowdfunding – This is when the investor gets some incentive or reward for donating to the business, such as a free sample product. 

 

  • Equity crowdfunding – This offers people to invest with an option to become part-owner of the business by trading money for shares. 

 

  • Debt crowdfunding – With this one, the business owner takes the money from the investors with the promise of repaying them. This category is for loaning, not a donation, or investing. 

When an entrepreneur considers crowdfunding, they need to decide which technique is best for their startup. No matter which option is used, crowdfunding offers a wide array of benefits for startup businesses. Also, something to note, make sure you have other important aspects of the business set up and ready to operate before you begin setting up your project. Most investors will want to know that you have a business plan in place, accounting, HR, payroll, and other key divisions ready to operate when you launch. You can hire a team of people to handle each of these responsibilities if you have the resources, or you can outsource to an HR/Payroll company that can manage a lot of these administrative responsibilities for you. 

Easier To Start

Starting a crowdfunding campaign is pretty easy, much easier than applying for banking loans or hunting down potential investors. Typically, there are minimal requirements and little to no paperwork to fill out, no pitching business presentations, and no special qualifications needed to create a campaign. The platforms are generally free as well, so there will most likely be no cost for this effort. In about an hour or so, it is possible to have a live crowdfunding campaign fully ready to launch.   

Gain More Exposure For Your Business

Exposure is incredibly essential, especially for startup businesses that want to be recognized. Succesful crowdfunding campaigns provide an excellent opportunity to gain exposure and quickly make a name for yourself in the local community. The more people who know about the startup, the better. It will require a lot of time and energy to set it up properly, but when done right, and effectively, it will drive more advocates who are willing to support your project. 

Gain Loyal Advocates

Even though crowdfunding is mainly for obtaining funding, it is also a great way to gain loyal advocates. Any business owner will agree that having loyal advocates is critical for business growth. Finding people who will support the business mission is also typically inclined to help with promoting the campaign through their social media profiles, which creates more exposure. More exposure means more opportunity for more funding and potentially more advocates. 

Receive Community Feedback

Crowdfunding also opens up the business for community engagement, allowing people to ask questions, leave comments, and provide feedback. Getting feedback, both good and bad, will help entrepreneurs see what is working with the business and what needs improvement. It also gives the community a feeling of involvement, which is a great way to create a loyal customer base. For startups, it is beneficial to get feedback such as this to make sure the business is heading in the right direction for long-term success. 

Author: Digital Solutions

 

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