Recent years have seen a significant rise in the popularity of crowdfunding. More and more startups and businesses have been utilizing this alternative method of raising funds.
Revolut, a UK-based Fintech startup, used equity-based crowdfunding to build a financial solution that is already being used by more than 10 million people. The company has managed to run many successful equity-based campaigns, tapping into several communities of investors.
Etergo, a Dutch electric scooter manufacturer, aims to revolutionize the market with their premium electric scooters. The company raised over £3 million through crowdfunding to build a scooter what they call ‘The Dutch Tesla on Two Wheels’.
Both Etergo and Revolut, like many other startup companies, use crowdfunding platforms to raise funding for their business. These were just a couple of examples to show how crowdfunding is helping entrepreneurs willing to change the world.
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Crowdfunding has already begun to change the way how we finance projects – be it startups, musicians, or artists. Based on the data collected by Finanso.se, “The global crowdfunding market is expected to reach over $8.5 billion in transaction value, increasing 23.3% year-on-year.
It is steadily becoming a quick, easy, and a popular way of raising funds for startups. Though generating investment is the main aim of a crowdfunding campaign, it also helps startups to gain market attention, validate the business idea, grow customer base, and more.
Read: Blockchain Crowdfunding Disrupting Finance and VC
Benefits of crowdfunding for startups
Crowdfunding scores as a preferable funding option for many businesses nowadays. Let us know what sets it apart for startups.
It is a more efficient source of capital
Crowdfunding is a great alternative way to raise funds for startups. Entrepreneurs can quickly raise money from investors in exchange for giving their products, related gifts, or equity. Compared to traditional options such as banks, reaching a platform like Kickstarter or Indiegogo is simpler to raise investment and tell your story.
It offers a way to refine your startup idea
One of the benefits of crowdfunding is that it takes your product closer to customers even before its launch. It gives a chance to engage with people and let them ask questions, send feedback, and suggestions. The feedback from potential investors can help you refine your business idea and enhance your product to fulfil the unmet requirements your customers might have.
It helps you build a community for your product
“Before you even start building your crowdfunding page, Start building a crowd first.” — Roy Morejon, Crowdfunding expert and startup advisor.
When an investor shows interest in your idea on a crowdfunding platform, it means they believe in your product. It helps others to grow confidence in your product or service. The people that are interested in your idea tends to be early adopters, promoters and advocates. They can be the key to the success of your startup.
It provides an opportunity to pre-sell
Launching a crowdfunding campaign enables a startup to sell a product or service even before the official launch. It not only helps to gauge reactions of consumers but also offers validation to whether to go with the existing product or make necessary changes to increase the chances to sell.
Conclusion
Crowdfunding has proven to be a substantial way for startups to –
- effectively raise funds,
- engage with people to gain early feedback,
- build a community, and
- get the exposure they need to grow.
Benefits of crowdfunding are numerous. With more and more platforms proving their reliability and trustworthiness, the crowdfunding market continues to expand. Consequently, it will bring a myriad of opportunities for startups and businesses to achieve their goals.
