What You Need To Know About Crowdfunding
What is Crowdfunding?
Crowdfunding is the process of collecting funds for a wide variety of purposes through a collective approach of numerous participants. It is usually in the form of a mass level collection of funds through buyers and sellers both.
The funds that are collected are used to support the efforts of the ones who started the process. Today, this funding is done for some purposes, charity being one of the most notable ones.
The attempts of the individuals in the crowd influence the results and the process of the project. One may work as a donor or as the agent or the business partner.
The motivation for consumer participation comes from the consumer’s feeling that he is equally responsible for the success of the other’s initiatives. Though he is partially responsible, he can give the suggestions to promote the business. He gets a platform to show his talent, and this inspires him to contact other firms and consumers. He may increase his social reputation, and in this way one day he can start his own business.
How Crowdfunding Works
An example of crowdfunding could be selling t-shirts signed by a popular singer to benefit a charity for blind pupils in a school. In this example, the sellers and buyers both are pooling in for charity.
The seller had either paid the cost of making the T-shirts or has bought them from the wholesale market. The buyer pays for the T-shirt and buys it. The seller can also deduct his cost and donate the overall profit to the cause.
Another great example of crowdfunding is travel writing. Many travel writers these days finance their trips by selling their photos and writing stories about their adventures. These photos and write-ups are sold to magazines and websites or are sold as stock content.
Thus, crowdfunding is also widely known as an informal way of collecting funds through utilizing services and products that are of the least value to an individual or the company.
Implementing Crowdfunding Online
The phenomenon of crowdfund investing is becoming enormously popular these days, thanks to the internet. Previously used methods of fundraising are now becoming obsolete.
The reason why crowdfunding is gaining mass attention is the level of ease and the smaller amount of contribution involved by each individual. Also, because it is a collective approach on a mass level, the cost of advertisement and marketing is reduced automatically.
Investors earn rewards aside from encouraging the growth of an idea they find valuable while entrepreneurs secure enough amount of money to launch or continue with their business.
The best attribute about this funding practice is that it is based on the open market where supporters for high-end, potentially innovative and promising ventures are not rare to find.
Here are some other potential benefits of crowdfunding:
Scope of fund
Crowdfunding is a great source of raising an amount of money for a number of businesses. Whether it is for disaster relief, a saleable product, launching a start-up or a creative project, funds are easy to raise, as long as potential investors are interested in the idea. Crowdfunding can also be used for business expansion.
Crowdfunding helps in marketing a product while funds are still being raised. By generating interest and awareness, it helps a business reach wider audiences who would carry forward the idea with their network for generating even more attention.
What it means is much of the marketing is done while the product is still raising money itself.
Opens up opportunities for generating valuable feedback
When the idea reaches targeted investors, and they express interest in it, they would provide feedback important for the growth of the idea. Increased feedback pinpoints the loopholes and improves the product before launch.
Another benefit of crowdfunding is that it opens up room for innovation. When an idea is publicly accessible, it creates a good fan base.
What was earlier known to only a handful of people is now known to thousands, or even millions, of people worldwide.
Thus, crowdfunding makes product innovation more democratic and encourages everyone to think out of the box for creating better products for increased benefits everyone can earn.
Today, this crowdfunding is being used by people around the world not only for donations, but also for funding various activities about businesses, and educational sector, among many others.