Need money to get your product or company off the ground? Today getting funded couldn’t be easier! With the rise of crowdsourcing came the rise of crowdfunding, which is essentially the crowdsourcing of funds. The way it works is that contributors, investors or customers fund your project, startup or service often in exchange for a reward, equity or donation. There are several crowdfunding platforms that do a great job in funding projects; sites such as Kickstarter, Indiegogo, Quirky, Tilt, Crowdrise and Invested.in.
You’re now familiar with the basics so lets dig a little deeper into the primary methods of crowdsourcing and also the benefits of funding your project this way.
These are the 4 primary methods to source funds through the crowd:
· Crowdsourcing funds through donations; this is primarily a good source of funds for social causes or good deeds.
· Crowdsourcing funds by taking on Debt; is good for funding projects in a local community (think restaurants, stores, etc)
· Crowdsourcing funds through Equity stake: thanks to the JOBS Act investments are now open to the public in which the crowd owns an equity stake for their investment.
· Crowdsourcing funds through providing rewards for early customers; this has been the primary driver of crowdsourcing thus far. Entrepreneurs offers rewards or incentives for funding projects; often entrepreneurs may sell a product before it hits the market through rewards base crowdfunding.
Now lets talk about the benefits of crowdfunding. There are many benefits to crowdfunding, with the primary benefit being access to the actual capital, however the benefits extend beyond just capital. The benefits include:
Gaining momentum – Traction is important because momentum is essential to a successful start-up. With pre-orders of your product or service already in place, you can now get to work and continue gaining momentum.
Proof of concept – Preorders also demonstrates interest in your product/service. The market has spoken and they said “we want your product”. This also shows people genuinely believe in you or your company.
Media & marketing exposure – Media exposure is a great benefit to any startup as it can provide you with the exposure to potential clients. The crowdsourcing campaign created can provide you with the exposure your company needs, gained through blogs, publications, articles and videos that float around the web.
Investor exposure & interest – The momentum your funding campaign developed and your proof of concept, both work to your benefit when dealing with investors. Investors want to know that people have a genuine interest in you or your product, and both are evidence of interest. The interest by consumers are of interest to investors as well and entices them to invest in your company.
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