Why would you do crowdfunding for a business startup? Well, for a startup company, raising funds is an important part of being able to grow, and for most startup businesses it’s hard to qualify to get a loan. Rewards-based crowdfunding on Indiegogo or Kickstarter could be a safer and more beneficial alternative for a business startup.
Crowdfunding for a business startup has many benefits for small business owners, proving to be very popular in recent times.
Note: This article focuses on Reward-based crowdfunding for more equity-based crowdfunding articles please read here.
1 – Validation
A very good way for startup businesses to know whether people would purchase the product they are offering is via crowdfunding. There is no better way to validate a product than to see whether individuals will take out their money and pay for something that does not exist yet.
If you find that people are willing to do this, then you know that as a small business you have a product that solves a real-world problem.
Crowdfunding for your startup business also makes it easier to improve a product you are launching, as you can receive feedback from all your investors, customers can ask questions that can lead to product breakthroughs. Any information gathered during your campaign helps lay the foundation of your business for the future. Crowdfunding for a business startup also helps build up a community of people who will follow product development from start to finish.
2 – Low Risk
Its easier for small business owners to obtain capital to grow as a business when they crowdfund for their business startup, without any of the risks that would come from obtaining a bank loan or putting up your belongings as a collateral.
Crowdfunding validates the market, making it so that small business owners and investors do not have to worry about taking on much risk as they do not have to dump their savings into a business venture that does not have any impact in the market.
3 – Added Value
Apart from adding monetary value, crowdfunding for a business startup can also be helpful in learning about how to make businesses successful. It helps small business owners have a wide network of potential customers, mentors or even beta-testers of your product. It is very useful for small businesses, as it helps them find out which parts of their business they need to improve upon, to grow further.
Crowdfunding is a built-in crowdsourcing network, which is interested in helping businesses be successful, by offering a wide level of expertise and support when businesses need it, and this can be from your investors or the crowdfunding platform that you are a part of.
A way to ensure this is by offering your investors exclusive discounts or invite them to test out your product at an event. Crowdfunding is the way to add the most value to your business with a low risk.
4 – Generate More Revenue with Less Risk
As a business startup, crowdfunding can help small business owners pre-sell units during a 30-60-day period, which helps them order a large number of their products from their manufacturers, which usually decrease the cost per unit, which helps increase a business’s profit margin. This is considered a great model, as companies can capitalise on pre-orders and they do not have to worry about amassing and inventory and wasting money.
5 – Position Yourself for Better Deal
If you have proved that your product is successful in the crowdfunding world, it opens the opportunity to grow your business in the future. If there is proof of a high demand for your product it will help close larger volume deals directly with either retailers or even the chance to gain potential licensing deals.
It is not only startup businesses that have a lesser amount of funds that crowdfunding is exclusive to, it is also good for businesses to help them build up a community and helps companies see a good amount of revenue within a handful of months.
Crowdfunding for a startup business helps you develop and/or sell products but also helps shine a positive light on the company in any future press.
Also, this method is very social in nature, and any success is known across social media, and will always be live on the platform.
To finish off, crowdfunding is a suitable way to raise funds in comparison to other methods of funding, especially for startup businesses. The funding has lower risk in comparison, as there isn’t interest in this method of funding and there’s also a low risk when there’s money coming in from the business idea. It also allows you to gain a portfolio of demand for your product, which will allow you to expand easier.
Do you need crowdfunding support?
We can help. Drop The Crowdfunding Studio are proud partners of Crowdcube and Indiegogo. We assist ambitious businesses in communicating their ideas, products and services with outstanding crowdfunding video production, campaign design, crowdfunding marketing and crowdfunding PR.
To learn more about us and our services, visit our website: drop.studio
Or book a free phone workshop today and ask us anything, like how to create a successful crowdfunding campaign or how to accelerate your business from zero to fully funded.