5 Benefits of Crowdfunding

What is Crowdfunding?

Crowdfunding is a popular method of raising capital from a range of people. It is a relatively new idea due to its harnessing of social media connectivity. People can pitch business ventures to a large group of investors and entrepreneurs, who can invest as little as $10. The collective capital raised by millions of these investments can finance the business venture.

Crowdfunding can also provide entertainment and engagement from users over even the smallest business ventures. One user on Kickstarter aimed to raise around $10 to make a potato salad, and instead received a pledge from 6911 users to fund $55,000.

Famous Platforms

Some successful crowdfunding platforms are:

  • Kickstarter: Founded in 2009
  • Indiegogo: Founded in 2008
  • Patreon: Best for content creators, founded in 2013
  • Fundable: Best for small businesses, founded in 2011
  • GoFundMe: Best for personal fundraising, founded in 2010
Image of Indiegogo and Kickstarter- From Indiecomixdispatch

5 Benefits

  1. Range of Investors

Crowdfunding platforms present an opportunity for anybody to pitch an idea, small or big, to a range of willing investors. These investors, in return, have a range of ideas and pitches to choose from and still only invest a small amount.

2. Financial Support

Crowdfunding is especially attractive to those looking to start small businesses, and who lack the resources or influence to pitch to big investors. Crowdfunding platforms earn revenue as a percentage of funds raised.

3. No need to Pay Back

In donation crowdfunding, entrepreneurs do not need to pay a percent of their revenue back to the investors because crowdfunding is donation-based. However, the most significant investors may receive a prototype of the product or service before public release.

In debt crowdfunding, although this involves borrowing money from investors and paying them back with interest, it can still be useful for those with a low credit score who may not be viable for traditional loans.

4. Market Validation

Engaging with a range of investors helps understand their collective views and preferences to help meet consumer needs and improve the product

5. Low Marketing Costs

An abundance of supporters and investors who have already committed to the product can reduce marketing costs. These costs would have otherwise been necessary to spread awareness about the product.

With crowdfunding, large awareness is already there.  


If you want to learn something else, such as the power of FinTech, visit:
https://www.thepoliticsoutlook.com/hrishi/the-fintech-industry-uncovered/42/?swcfpc=1

To read more finance articles:
https://www.thepoliticsoutlook.com/category/finance/

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