Crowdfunding and What it Means For Your Business

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I’m sure you’ve heard of fundraising, but have you heard of crowdfunding? Crowdfunding became a big thing with the rise of websites such as Kickstarter. Crowdfunding is the process by which you raise capital through either donations, or a number of investors. So how can your business benefit from crowdfunding?

How can crowdfunding benefit Your business

To start, the two forms of crowdfunding are donation based, a-la Kickstarter, or where investment crowdfunding where you sell equity or debt online for capital. Crowdfunding may seem too crazy to actually work, but several new startups have proven to be successful after launching Kickstarter campaigns. Pebble was a slick looking e-ink smart watch that synced with your phones and provided you with email notifications, etc. With a goal of bringing in $100,000, Pebble ended up raking in $10 million in crowd funded donations and turning into one of the hottest startups in the past few years.

And let’s not forget Oculus Rift. The virtual reality game system was pledged around $2.5 million and then sold to Facebook for a whopping $2 billion. If these and several companies could do it, then why can’t yours? Crowdfunding has made it possible to turn crazy ideas into a reality.

What’s the difference between Crowdfunding and other Investments

Crowdfunding and other investments differ greatly. As a startup with a crazy idea, but no money, you’ll need to look to outside sources to raise enough capital to actually create your product. However, not very crazy idea is going to seem like a profitable investment. Hence, investors will refrain from dropping hundreds of thousands of dollars, unless it seems like a sure thing. This is where crowdfunding comes into play. Crowdfunding allows you to put your product or idea in front of the consumers. if they love the idea or believe in it enough, then they’ll donate a small amount. The more popular the idea, the more funding you’ll get from thousands of people (this is where the crowd in crowdfunding comes from). The other great thing about crowdfunding, is that as a business owner you don’t need to give up any equity to build the capital, meaning you’ll have more to leverage in future fundraising rounds.

Is crowdfunding right for me?

This is a great question. Depending on your business it may or may not be right for you. Crazy ideas have been funded through crowdfunding, such as a10ft tall Robocop statue in Detroit, but if you think your creative writing agency is going to get thousands from crowdfunding you may be in for a rude awakening. Crowdfunding tends to be most popular for those off the wall viral ideas, if your business seems too much like a traditional idea and not something off the beaten path, then you may want to rethink crowdfunding.

Overall, crowdfunding is great for those up and coming tech companies specializing in video games, or other products that seem to fill some niche need. Such as an iPhone dock that actually holds your iPhone and charges it regardless of what size case you have and that is slick enough to let you unplug it without having to use both hands. Several, crowdfunded projects, especially through Kickstarter resemble a modern day “made for Tv” product. Just way better marketing, and way cooler ideas.