6 Convincing Reasons To Opt For Crowdfunding To Foster Innovation

By Soko Directory Team / January 16, 2020 | 12:39 pm

Coming up with a ground-breaking idea for a business is one thing, but managing to gather enough financial resources to set it in motion is a completely different story.

In fact, this is one of the biggest struggles that upcoming entrepreneurs have to face, and we all know how daunting it can be to walk from bank to bank, trying to get a loan to fund your dream.

Oftentimes, banks refuse to loan money to small businesses, especially when it comes to young entrepreneurs, precisely because they have no guarantee the business will succeed.

Fortunately, we live in the era of technology and innovation, meaning traditional methods have long stopped being the only ones that work.

Crowdfunding, a new way for entrepreneurs to raise enough capital to kickstart their business, is the talk of the town recently. In fact, there are over 600 crowdfunding platforms all over the world, helping entrepreneurs, artists, and non-profit organizations raise billions of pounds yearly.

To put it simply, crowdfunding means pitching your idea on one of the many available platforms and hoping it is convincing enough for people to invest in it. In return for those who help fund your idea, you will either have to give back the money, with a set interest, grant shares in the company, or provide other forms of rewards.

Below, we will be discussing a few of the reasons why crowdfunding may be the best option for funding your business.

Crowdfunding can help when traditional funding options don’t work

Banks are not exactly known for being the most welcoming and willing to help institutions. The bureaucracy, as well as the notoriously conservative view of the banks especially when it comes to young entrepreneurs, are things that discourage people to even consider getting a business loan. Then, there come the financial limitations. There is only so much you can borrow from banks, and it almost never reaches 7 figures.

With crowdfunding, start-ups can reach millions to fund their dreams, but that happens mostly because of the way the system works. You don’t get that enormous sum of money from one person only, but rather from an entire army that analyses your project and decides your idea is worth their money. Think of it as a win-win situation. Investors lend you money, and you give them something in return, so in the end, if your business is successful, everyone will benefit from it.

You’ll have access to a diverse pool of investors

This is, in fact, what makes crowdfunding so successful. You don’t get funding form one single person, but rather from a group of investors that want to help raise the foundation for your business. This means unlimited financial potential, that traditional methods can never provide.

Investors, or angels, as they are often called, have experience in spotting potent ideas and, if they spot potential in your project, they will not hesitate to invest in it. And, trust me, if these people start pouring money, you are definitely doing something right.

“Getting access to investors will not only help you raise money but also provide networking potential. Oftentimes, these people are people who know people, meaning they might actually bring out more investors if they like your idea,” explains Melanie Rogers, a budget analyst at TrustMyPaper and IsAccurate.

Build a community around your unique business idea

Crowdfunding platforms are, just like any other platform on the internet, small communities that share the same ideas. By launching a crowdfunding campaign that is well put-together, you get the chance to attract not only investors but actual clients. People may be reluctant to invest in your idea at first, but they may just want to keep an eye on it for the future. If the launching is successful, they may end up contacting you either to access your services or to invest in your business in the future.

Plus, the word will carry on, that a new, innovative product is in the works. This can only attract more people that share the same vision. Who knows? Maybe what started out as a way to raise money, will turn into new partnerships, or a chance to meet people that share the same passions with you.

Crowdfunding can boost your marketing through social sharing

A crowdfunding campaign can be just as successful in boosting your brand image, as any form of marketing. For once, you will get to show investors, through your business plan, what your idea can bring to the world. If you have a prototype or a way for them to test the product, that’s even better. This way, they get to see how it works, and you will generate excitement for the actual launch of the product.

Jonathan Kohler, a social media marketer at GrabMyEssay goes on to say that “A crowdfunding platform will give you a new way to promote your business, apart from social media and other channels. If you manage to build a successful campaign, the notoriety your brand will get can only bring more buzz around the launching day. In fact, there is a high chance your first customers will come from the crowdfunding platform.”

You can increase the chances of pre-selling your business

In simple words, your crowdfunding campaign is a way to sell your product or service before the big launch. If your campaign is successful and gains notoriety, you will end up pre-selling your first batch of products in no time.

Being able to sell something without it even hitting the market is one of the biggest benefits crowdfunding can bring. You don’t only get enough money to fund your unique idea, but it also comes with a number of customers ready to try out your product form simply watching a video, or reading a presentation. Plus, these early adopters will serve as your biggest marketing strategy. They saw your idea of being born and taking shape, so it is only natural they will be your most eager fans.

Hundreds of success stories show that crowdfunding is effective

If all these abovementioned reasons did not convince you, then maybe a large number of success stories around the world will:

Coolest Cooler raised over 10 million pounds during their crowdfunding campaign when their goal was to raise 50,000. The product is a simple, yet very practical idea: a cooler that will keep your drinks cold and the music blasting. In fact, it is still one of the most successful projects out there.

Exploding Kittens is a board game that took the world by storm when it launched. Easy to play, attractive and plain cute, the creators aimed to raise under 10,000 pounds, but they ended up making almost 8 million and launched 3 expansions and 4othr games until now, all of them very successful.

The Equator, a Norway-based start-up that aims to change light aviation by developing a hybrid-electric aircraft. They raised enough money to build their prototype and are now working to launch it to the world.

READ: Here Are The 2020 Digital Marketing Trends in Kenya

Written by our Guest Writer Helene Cue

About Soko Directory Team

Soko Directory is a Financial and Markets digital portal that tracks brands, listed firms on the NSE, SMEs and trend setters in the markets eco-system.Find us on Facebook: facebook.com/SokoDirectory and on Twitter: twitter.com/SokoDirectory

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