Why Crowdfunding is Advantageous to New Entrepreneurs?

What Is Crowdfunding And How Does It Work For Entrepreneurs

Starting a business may be an exciting process, but it costs money. When determining business startup costs, it’s important to be realistic. Things like office space, legal fees, payroll, business credit cards and other organizational expenses can really add up.

Online crowdfunding — raising smaller amounts of money from multiple backers — has become an increasingly common solution to this dilemma because it allows startups to reach out to a large number of potential investors at once.

How Can Crowdfunding Help New Entrepreneurs

When you choose to crowdfund to get the capital you need for your business’s growth, your relationship with your customers changes into a purely transactional one into a deeper partnership.

Not only are your customers buying your product, but they’re also investing their own money into your business. On your end, you’re not just selling them a product, you’re also paying them back with your loan.

If a customer invests in your business, they’re not only more likely to continue to give you their business but are also more likely to tell their social network about your business. Why? Because now they have a stake in your success!

The Benefits Of Crowdfunding For New Entrepreneurs

If you’re looking into crowdfunding, you’re probably doing it for one major reason: to raise the capital you need. Crowdfunding is a great way of unlocking the funding you need for growth that otherwise might be difficult to attain. Instead of relying on a bank or scrimping and saving for years, you can use your community connections to reach your next step.

But, did you know that there are many benefits to crowdfunding that go beyond the money in your bank account?

Here are 12 benefits of crowdfunding for small business or entrepreneurs in India.

1. Crowdfunding Turns Your Customers Into Brand Advocates

When you choose to crowdfund to get the capital you need for your business’s growth, your relationship with your customers changes into a purely transactional one into a deeper partnership.

Not only are your customers buying your product, but they’re also investing their own money into your business. On your end, you’re not just selling them a product, you’re also paying them back with your loan.

If a customer invests in your business, they’re not only more likely to continue to give you their business but are also more likely to tell their social network about your business. Why? Because now they have a stake in your success!

We call this new kind of customer a “brand advocate” because their relationship with you goes beyond just buying your product or service – it shows they’re a superfan and are interested in your success. It also is a very valuable tool in your business’s growth.

2. Crowdfunding Strengthens Your Relationship With The Community

Your business already makes an impact on your community just by existing. You provide goods, services, and experiences your customers can’t get anywhere else, whether you’re an independent craft brewery, a soap shop, or a yoga studio.

How can a crowdfunding campaign possibly make that relationship stronger? By allowing your neighbors, customers, and biggest fans the opportunity to invest in your business, you bring them into a much deeper kind of relationship than just a transactional one.

Also, you’ve got the potential to help your community build upon their own individual financial goals by paying them back through your Honeycomb Credit small business loan. That not only leads to a strong relationship but also helps build a more vibrant, financially empowered community.

3. Crowdfunding Generates Marketing Buzz For Your Business

Another added benefit of crowdfunding is that it generates marketing buzz for your business. It does this in several different ways:

First, by creating a campaign page—which includes a professionally shot video, detailed story of you, your business, and your campaign, and all the little details about the financials – you have a chance to really tell your business’ story in a way that’s totally unique to other mediums.

Second, it will boost your campaign on our own social media, introducing your campaign to your network of thousands of investors. This is a great way to market your business to a national network of community-minded investors!

Thirdly, they offer the chance to do a pitch event for your campaign, allowing you to speak about the campaign in your own words and interact directly with interested investors.

4. Crowdfunding Can Lead To Revenue Growth

The winning combination of increased customer support, an infusion of capital, and marketing buzz leads to better business for those who crowdfund through Honeycomb. By increasing your business’s potential with your growth project, you’d expect some revenue growth, but Honeycomb helps give that growth a turbo boost.

On average, businesses that have crowdfunded have seen a 60% increase in revenue in a year after their campaign closed. That’s right: 60%.

5. Easier Access To Capital

Online crowdfunding platforms allow entrepreneurs and companies to showcase their projects to a larger number of potential investors, as compared to conventional forms of capital raising.

6. Less Pressure On The Management

Unlike the conventional forms of financing, such as venture capital, equity crowdfunding does not result in a dilution of power within a company. Although the number of shares is increased, the involvement of a large number of investors means that power is not concentrated around a particular group of shareholders.

7. Lucrative Returns

Although startups are inherently risky ventures, there is still a possibility that a company may become a unicorn and provide very lucrative returns to the investors.

8. It Serves As A Market Research Tool

The free market research study is one of the best benefits of crowdfunding. It could help you save as much as it rewards you. The best test environment for your brand is  your crowdfunding group, as they can help you determine the demand for your goods. If there are simply no sponsors for your perfect project, it’s a pretty good sign that there is no market for it.

9. A Free Portfolio

Consider befitting crowdfunding trends to keep the portfolio stable and well-diversified. Each direction has its advantages for investors, and you can also vote for crowdlending and equity investments. Stories of success make reading exciting, and there is a huge market for reporting coverage. Crowdfunding for startups in India is already a distinctive and hot business. Numerous active companies have seen more popularity and exposure as a consequence.

10 It Is Better Than Conventional Fundraising

Two of the most stressful processes any entrepreneur has to go through are applying for a loan or seeking other capital investments, particularly during the business’s initial phase. Today the entrepreneur can choose a crowdfunding platform, including business or non-profit fundraising, with captivating write-ups, graphics, and videos to get exposure and funding.

11. Trust

Investors are still searching for profitable enterprises. A great advantage is the vast number of individuals participating in your project; it shows venture capitalists that you have appeal and a substantial audience behind you. It is not unusual for crowdfunding ventures, after their campaigns, to gain more generous support from investors.

Tips For Launching A Successful Crowdfunding Campaign

New Entrepreneurs can host their own crowdfunding campaigns to receive online donations directly from their donors and their donors’ social circles to fund specific, urgent projects or campaigns.

Since crowdfunding campaigns often have a firm deadline when fundraising ceases, they can be an effective means of funding a campaign or project relatively quickly.

However, jumping into a crowdfunding campaign without proper planning can prevent your nonprofit from taking advantage of all that this particular fundraising style has to offer.

Let’s break down the steps you’ll need to take to effectively plan and run your campaign:

• Set your crowdfunding goals.
• Choose a crowdfunding platform.
• Design your crowdfunding page.
• Motivate your supporters.
• Advertise on social media and email.
• Transfer crowdfunding data into your CRM.
• Perform prospect research.
• Send follow-up materials.
• Target your message.
• Learn what makes a good campaign and a bad one.
• Build a community before launching.
• Speak to experts.
• Know your launch target.
• Use multimedia
• Research and Prepare
• Ask for Donations Early
• Ask the Right People for Donations
• Be Specific About What the Money’s Going Toward
• Offer Incentives (When You Can)
• Write Compelling Copy When You Share Your Crowdfunding Page
• Update Your Crowdfunding Page

Examples Of Successful Crowdfunding Campaigns

Not all projects succeed. Few of them even obtain significant levels of funding.

Many projects with excellent ideas end up failing, whereas others with simple premises flourish beyond all expectations. Crowdfunding projects tend to follow a viral method of growth and, as such, are quite unpredictable without the proper marketing.

“One of my favorite investment campaigns on [Republic] to date was RadioPublic,” Nguyen said. “They’re kind of like SoundCloud for podcasts and have investors like The New York Times, the parent company of WordPress and the Bose Corporation. They raised just under $150,000 from some of their most passionate users and listeners. To me, their trajectory is similar to Gimlet Media’s – they ran a $200,000 equity crowdfunding campaign in 2014 and were just acquired by Spotify this month.”

Another company that ran a successful campaign is Peak Design, which set a goal to raise $500,000 on Kickstarter for its Travel Tripod product. The campaign lasted 56 days and had 27,168 backers, raising $12.1 million.

Concluding a campaign

Once your crowdfunding campaign closes, one of three things happens:

If the campaign didn’t reach its target amount, funds are returned to the backers. Some crowdfunding websites still allow you to collect all the money you raised if you fail to reach your goal, though often at an additional expense.

If the campaign was successful, you receive the total amount of money you raised, minus processing fees. For example, Kickstarter charges a 5% fee for hosting the fundraiser and a percentage-based fee for payment processing. These payments are only required for successful crowdfunding projects and will not be charged to any that don’t reach their goal amount.

Equity crowdfunding campaigns differ in how they conclude, as you still have an obligation to the backers. That obligation depends on how the donations play out.

While crowdfunding does not guarantee the success of a project or the longevity of a company, it helps many entrepreneurs gain business experience and create relationships for other opportunities.

Summary

Crowdfunding can be extremely lucrative when crafted, promoted, and executed properly. A successful campaign requires up-front research to select the platform that best meets your financial and visual needs, a clear message that inspires action, creative and constant promotion by the organization, and consistent communication with campaign donors.

While in-person events may be canceled, the giving spirit has not. And lucky for you: SocialForAction has launched a crowdfunding feature to help nonprofits fundraise, thus increasing funds for nonprofits’ various projects! Watch the blog closely for updates.

Raise Funds For Startup With SFA

Social For Action connects campaign owners to funders in a way that is productive and engaging. The uniqueness lies within our various campaign, as a part of Sakal Media Group, we have extensive reach throughout Maharashtra and beyond, the most credible resources which are available to us. We have been previously supported By 2000+ Donors and over 15000+ impact stories.

We want to spur innovation & make access to funds easy through crowdfunding in India; while promoting transparency and accountability. We want to change the traditional methods of how ideas, activities, ventures and organisations are funded by making crowdfunding the go to method of raising funds in India. Start Your Fundraiser Journey with Social For Action, today