Both rewards and crowd investing offer a wide range of advantages over traditional business financing. With benefits ranging from a wider pool of potential investors to more nimble fundraising options, crowdfunding is going to continue to evolve into a more popular, and more powerful funding method for startups, local businesses, and inner-city real estate development. Though funding is almost always the main goal of a crowdfunding campaign, it can also be a fantastic way to gain visibility, validate your business, grow your customer base, and more.
Crowdfunding Is More Efficient Than Traditional Fundraising
When you’re an early-stage company, local retail business, or real estate development focused on building your business and attracting seed capital, you might not be able to afford all the time and attention that pursuing traditional financing demands. Compared to applying for a loan or seeking out accredited investors yourself, setting up a successful crowdfunding campaign on a platform is far more efficient and effective in getting your message out to the right people. With the right platform, you can tell your business’ story, produce a quick video, set up some enticing rewards, and benefit from having everything in one centralized location where potential backers can find you.
Crowdfunding Builds Traction, Social Proof, and Market Validation
A strong, highly visible crowdfunding campaign can provide validation and social proof that’s vital in charting your path forward. When potential customers show interest in your startup’s product or service, you’ve generated social proof—demonstrating that other people believe in what you’re doing. Once early adopters vet and buy into your idea, others are more likely to follow suit. Social proof is translated into traction—whether it’s a large number of backers, pre-orders, or media attention—that’s invaluable as you pitch to other investors.
Crowdfunding is an opportunity for crowdsourced brainstorming
Hear your would-be backers poking holes in your business plan or asking some tough questions? Take it in stride and accept it as free, crowdsourced brainstorming. The basis of a startup is finding some important, unmet need that your customers have, and deciding to be the one to do something about it. Thus, it’s important to seize any opportunity for customer feedback and consider it in planning your startup. One of the greatest things about crowdfunding is how close it gets you to your customers, giving you a chance to engage them and field questions, complaints, feedback, and ideas. You never know—your company’s next great idea could come from somebody who is a staunch member of your crowd.
Crowdfunding Gains Early Adopters and Loyal Brand Advocates
The people that power your idea’s social proof are your early adopters and potential brand advocates. They’re the people who believe in your story, product, or service, enough to stake their money on its longevity and long-term success. These early adopters are key to the success of your crowdfunding campaign and the momentum you keep after closing, being the ones most likely to share your vision with friends and family and promote it through their social networks.
Crowdfunding Doubles as Marketing and Media exposure
Press coverage will create more eyes on your campaign and create lasting brand awareness for your startup. This can come in the form of a feature story on a popular news station, blog, or print publication, and is a great way to bring in backers outside of your personal network. A good feature story or Twitter mention can create a powerful snowball effect, putting you in touch with major investors you might not have otherwise reached. Whether they read about your new product or development on a popular blog or hear about your innovative campaign from a friend, successful crowdfunding is a great way to capture new investor interest.
Crowdfunding has grown into an excellent way for entrepreneurs, local business owners, real estate developers, and early-stage companies to validate their business, find capital, early adopters, and get the exposure they need to grow. To recap, some of the most powerful ways a crowdfunding campaign can help build more startup momentum than other financing methods are:
- It’s more efficient than traditional fundraising.
- It generates traction, social proof, and validation.
- It’s an opportunity for crowdsourced brainstorming to refine your idea.
- It gains you, early adopters and loyal advocates.
- It doubles as marketing and media exposure.
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