Anyone who has ever had the experience of running their own business from scratch, would probably confirm that the Internet is an excellent tool for entrepreneurs. The ability to contact everyone and everywhere from your home has really changed the course of business nowadays. What’s more, the appearance of the social media has opened a wide range of new possibilities. And one of them is crowdfunding.
Crowdfunding in a nutshell
In short, crowdfunding is a device for collecting money needed for your startup via the Internet –mostly the social media and special crowdfunding platforms. This method is based on the involvement of family, friends, customers or individual investors in the fundraising, using their connections to diffuse your ideas to the wider audience.
How does it work?
Raising the startup capital used to be much more complicated and much less effective. The entrepreneurs choosing a traditional way of collecting funds go from door to door with all the necessary documents and devote lots of their time and energy to gain interest of their very limited audience. Crowdfunding platforms, on the other hand, open your business door to much more options than angel investors or banks. You build up your own online campaign, create a showcase and let it be shared between any interested potential investors who, at the same time, have more varied options to help you develop your venture.
What are these varied options exactly?
You have three main crowdfunding types to choose between.
- Donation-based type – you are not supposed to return money to the investors; the examples can be: charities, non-profit initiatives or disaster relief.
- Rewards-based type – your investors are granted with a “reward” in a form of your product or service, depending on what your business provides. This form of “incentive” can be both effective and low-cost.
- Equity-based type – you offer your equity shares in order to receive financial help from the contributors. Therefore, you must share your profits with the investors.
Why is crowdfunding better than the traditional ways?
It has been already stated that crowdfunding is undeniably more convenient and useful, especially for startup businessmen, than the traditional knocking on wealthy men’s door, and here we list a few reasons to prove our point.
- Using online resources enables you to export your ideas to masses so that they become much more reachable for the potential investors.
- You can be much more efficient in your efforts to collect the capital. Thanks to your central online profile you can reach all interested contributors at once which saves your precious time.
- It is an excellent way of promotion and marketing. If you are not present online, you do not exist at all.
- When you share your idea with a wide spectrum of audience, they give clues. The more suggestions you receive, the more improvements you can make so as to jolly investors into cooperation.
- One more advantage of using crowdfunding is the overall picture of your business concept which you gain after completing the process of creating your profile. It makes you analyse the idea step by step and helps organize the thoughts.
Concluding, it has never been so easy to make your business ideas work. Learn more about crowdfunding and start being your own boss.