We are often asked “Why Crowdfund?”
We thought we’d take a minute to break down just some of the reasons why we think it is a great idea.
A good business creates a solution that solves a problem. That problem needs to be faced by enough people to sell the solution and in turn you can make money and with luck become profitable. So that brings us to reason number one:
Crowdfunding forces you to commit to testing if you are solving a real problem. Your crowd will likely be your first customers therefore by promoting your campaign you can determine the engagement with your product or service. Good crowdfunding campaigns will use focus groups and define their target audience before launch applying community feedback to improve the product before it’s finalised and released to the wider world
Once you understand your market the other benefits naturally fall into place
Capital Raising/Show me the money:
Startups need money to create their product and established businesses need capital to grow. You may want to develop your website, create your app or manufacture your product. You will ask yourself, where is this money coming from? Is it your life savings? A loan? Have you brought an investor on board? Every founder pays a fair amount of money out before money starts to come in through sales. Crowdfunding can effectively pre-sell your product. Reward based crowdfunding can sell the idea and the prototype of your product or service before you pay out however much is needed to make it a reality.
Businesses and Startups need people to know they exist. If people don’t know you exists how can they buy from you? Marketing and brand awareness are very important, your target audience needs to see your social media presence, they need to see you in their inbox, in the blogs they read, and in magazines and newspapers too. The more often they see you, the more you will imprint into their minds and the more likely they are to remember you when they need you. All of this helps build trust and loyalty with your brand. However, it takes time and costs money and maybe it is hard to spend that if you are dealing with process, manufacturing or cash flow issues, you may think you can put off marketing as it isn’t a “priority” This is where crowdfunding helps. You can effectively take out three birds with one stone. Crowdfunding campaigns with the most donors always have a high PR presence, a large and engaged social media following and a large email list with a high opening rate. The effects of this crowd building and brand awareness activity will not just last the length of your campaign it will last forever! PR contacts generated creating your crowdfunding campaign can be approached again and again following your business journey.
Successful reward based crowdfunding will always brings in customers. A crowdfunding campaign at its best is an integrated PR, social media, email, event, fundraising, sales campaign. Not only does it combine everything your business needs generally it is also significantly cheaper! If you consider the costs, both in time and financial value of doing all the above campaigns and potentially hiring numerous freelancers/agencies it will be much more expensive than launching a campaign and possibly hiring a crowdfunding consultant/agency to run your campaign. This means you raise the funding you need, enjoying the highest ROI possible and spend the least amount of money possible
Written with extracts taken from an article by Jes Bailey (Crowdfunding Consultant)