Entrepreneurs traditionally used to get funds for starting their new businesses from financial institutions or wealthy individuals after convincing them that their ideas are viable. Bank loans, venture capital and angel investors are however not the most reliable sources of funds for anyone that wants to start a new business. Even after polishing your business plan and doing all the necessary market research, you will still find it almost impossible to get any funds especially from financial institutions, VCs or angel investors. The main reason for this is because over 50% of business startups usually end up failing. But crowdfunding changes a lot of dynamics that addresses most of the challenges entrepreneurs face when starting their businesses.
First and foremost, crowdfunding provides an alternative source of funds without most of the difficulties associated with traditional sources. It is like a funnel with the wide open side facing a crowd of potential contributors. The crowd will help you raise the capital you need if you convince them that your business project is it. That pushes an entrepreneur to be thorough with their business plans, product and market research. In other words crowdfunding accomplishes more than just raising the capital.
Not every crowdfunding project ends up becoming a success story, but even if your campaign doesn’t succeed in raising the amount you are targeting, you still gain in other ways. That includes understanding the reason why your project doesn’t attract enough backers, or if you targeted the right audience in the first place. So entrepreneurs fail with their first round of crowdfunding campaigns, then later on after correcting any mistakes they learned launch a fresh campaign and successfully raise targeted amount of capital. Crowdfunding gives entrepreneurs an opportunity to test their business projects as it is their potential customers that qualify as backers. A project that attracts enough backers and raises funds successfully most of the time ends up becoming a successful business.
Crowdfunding can be very useful in bringing press attention to your project. A lot of PR and marketing activities must be carried out in order to attract prospective backers. That also means attracting potential buyers for the products or services you intend to provide to the market. About 3 to 6 months before you even launch the crowdfunding campaign on a platform like Kickstarter or Indiegogo, you should be marketing your crowdfunding project on relevant social media sites. You must have identified the target audience to reach via Facebook, Twitter or similar social sites depending on the nature of your business product idea SmartBoost System can help you with those strategies as well.
You also pitch to the traditional media even using social media platforms like twitter that most news reporters depend on, so you must be creative to come up with a great story behind your project. That should be a story worth getting you the necessary press coverage, especially around the time of launching your campaign. It helps if the campaign goes live on Indiegogo or Kickstarter with the right momentum that if maintained can meet or exceed the amount targeted to be raised. A crowdfunding campaign provides you the opportunities needed to build a customer base, discover business partners or allies, raise additional funds from other sources after the campaign, develop future product ideas and much more. With the reward based type of crowdfunding, an entrepreneur maintains total business ownership because backers do not become shareholders.