As the economic landscape continues to dally in recession state, and commercial lenders are reluctant to bank on unproven startups, entrepreneurs are turning to their community to raise the funds necessary to turn their dreams into reality. Through crowdfunding platforms such as Indiegogo, Kickstarter, Fundable, etc., entrepreneurs are able to request donations, exchange “perks” for funds, acquire lending, or offer equity in their startup venture.
This community oriented funding approach is rapidly taking the place of traditional business financing, providing entrepreneurs with a viable opportunity to not only raise start-up capital but also establish a customer base before they even open their doors!
Here are three reasons every startup should consider crowdfunding:
Imagine receiving starting a business with funds that you don’t have to pay back. Too good to be true, right? Wrong!
Crowdfunding allows a business to presale perks (services or goods) to interested parties, receiving the funds prior to delivery. An entrepreneur opening a cupcake shop, can pre sale dozens of cupcakes on a crowdfund platform, and utilize the funds generated to purchase the commercial kitchen equipment, business design, cash register, and other necessities to begin baking. The pre-sold cupcakes are then delivered to the perk purchasers following the startup’s launch.
Funds received via crowdfund offer many advantages to a loan—no interest charges, no cash payments, no credit score consequences—just a simple “IOU” for future products. This low-risk funding allows start-ups to reduce initial costs and establish a solid customer base before the grand opening.
And just when you thought the funds were good…
Marketing ones crowdfund—an opportunity the community to empower an entrepreneur’s dream —is different than a hard sell “buy my product because it’s the best” marketing strategy; it’s much, much better. Company promotion that occurs throughout the crowdfund provides a unique opportunity for community engagement. These “fans” value the opportunity to champion your cause–rooting for the proverbial “underdog”– and the opportunity to play a pivotal role in a new business’ success.
In addition to the “soft sell” ad op, the cause orientated aspect of crowdfunding attracts multiple media venues to cover your story. Industry publications, entrepreneur podcasts, local radio and news channels, etc. often view a crowdfund attempt as “corner property” positioned for wide spread community appeal. Notify local media channels, providing campaign specific details
including your vision, needs, and expected impact; get ready to make headlines.
I recently assisted with a campaign seeking start-up capital for a tech startup. While we succeeded in securing the necessary funds and landing some sweet PR spots, the campaign’s biggest score was establishing a network of supporters from all around the world. Some sent money; others’ offered professional skills pro bono. The small crowdfund campaign continued to pay dividends in terms of continued community contribution. As the newly funded startup moved towards the launch, the support continued to flow in–encouraging emails, interview opportunities, mentoring professionals, top talent seeking positions, additional lending options, etc.
Building a strong referral community often takes years for traditionally funded startups; however, crowdfunding allows the startup to greatly accelerate community development. Launching your business with a crowdfund created community is like trotting onto home court, stands packed with cheering fans, the squealing squad of cheerleaders, and a coach wearing your colors providing the objective strategy necessary to win the game. A “wellplayed” crowdfund campaign can set your venture up for success.
Ready to crowdfund? Research available platforms, and identify the one that will complement your venture. There are many niche platforms available, each offering unique advantages and disadvantages to the entrepreneur looking to turn their business dream into reality.