Posted: Wed 27th Mar 2013
Small enterprises are turning to innovative ways to fund their projects and ideas, with crowdfunding becoming more and more popular. We launched our own crowdfunding channel last week in partnership with Crowdfunder - and they sent us these five reasons why crowdfunding makes sense for small businesses.
Crowdfunding allows business-owners to ask the community closest to them to invest in their idea or project - whether that's a new business venture, the latest equipment or a new van to sell your product direct to your customers. Typically, you have a limited time to raise the funds while asking for a little help from your network.
So what are the top five reasons to crowdfund, and how can it transform your idea into a real business?
1. It provides funding
Given the difficulties start-ups and growing businesses face getting funding from traditional sources, crowdfunding offers a genuine alternative for raising cash. The innovation charity Nesta has revealed that the UK crowdfunding market has grown from virtually nothing in two years to Â£80 million last year. Worldwide, the crowdfunding market is thought to be worth $1.5 billion. Crowdfunding is open to anyone with a project or business idea and you get the funds from the people who matter the most - the crowd. This money isn't a loan but an investment t you repay in terms of rewards and pledges can start from as little as Â£1. What have you got to lose?
2. Crowdfunding validates your idea
By testing your idea on the crowd first, you get an immediate sense of whether it's really valid or not and has a place in the market. If people like your idea and invest in you, you know from the start that you have backers and an engaged community around your project or business - and that's a great start for any new venture.
3. You can help to transform your community
One of the major benefits of crowdfunding is the inspiration it provides to others - not just those who have backed you, but other people in your community who realise they can do the same thing. What's more, at Crowdfunder we particularly like to back projects that are designed to help communities. We've got a social conscience and we know you have, too!
4. The PR benefits
Inspiration, community support, the creation of new communities around your project or business - these are all great levers for generating PR for your venture. People are excited by crowdfunding and if they've backed you they're going to tell their friends. That means that straight away you've got a community of supporters talking about your idea on Twitter and Facebook. That's not to mention that your local press might be interested in your achievement, and at Crowdfunder we're always looking for great stories to shout about, too.
5. It helps you work out pricing and how best to pitch your idea
We advise all business-owners and project developers to come up with at least five tangible rewards to offer backers in return for pledges. The way you pitch your idea and the rewards you offer are vital, because they can make or break your project. Sell it poorly or offer unsatisfying rewards and you don't get investors - it's simple. So the crowdfunding process helps you develop an attractive pitch and calculate the value of your idea to your potential customers. For instance, if you're offering a sample product for a Â£50 investment and no-one's pledging, it may mean you're pricing it too high; bring it down and you could start attracting interest. You're learning vital lessons about your business from the word go.