Crowdfunding and its Significance in the Business World of Today

Whether you are planning to launch a start-up or successfully running a well-established business venture, there is a fair chance that you will want to get introduced to the concept of Crowdfunding sooner or later.

People have never been short of ideas. It’s just that back in the day, many of them failed to put their ideas into practice due to the lack of financial resources at their disposal. Today is a different story however. Your vision can change the world for the better, so don’t let minimal funds strip you of the chance of making a difference!

To get help with raising funds for your venture, you can turn to Crowdfunding. It is basically a marketing strategy which involves collecting small amounts of money from several people to raise funds for a business project.

Types of Crowdfunding

Yes, the marketing strategy in question can help you in racking up the funds required for the sustenance of your business venture. However, you should first understand the core concepts of this strategy and how you can effectively use it to take the next step.

For starters, there are various types of Crowdfunding. The four types listed below cater to entrepreneurs and businesspeople with different takes on how funds should be collected for a project.

1. Rewards-Based Crowdfunding: By endorsing this type, you have to ensure that the people who invest in your project receive valuable (but non-financial) rewards at a later stage. The best approach you can follow in this case is to share the products or services created as a part of your project, with the donators.

2. Equity Crowdfunding: Let us introduce you to a completely business-esque type of Crowdfunding i.e. Equity Crowdfunding. In this type, anyone who financially contributes in a project becomes the said company’s stakeholder. It is a risky move, but the potential of getting rewarded is also there.

3. Debt Crowdfunding: What differentiates debt Crowdfunding from equity Crowdfunding is that in the latter, the donator becomes an investor. Meanwhile in the former, the contributor needs to be paid back in a timely fashion, along with interest. Although this type of Crowdfunding is underrated, its true worth can be highlighted when the time is right!

4. Donation Crowdfunding: This is what most people think of when they hear the word "Crowdfunding". As the name suggests, this type basically refers to people donating funds to a charity, without expecting anything in return. This type of Crowdfunding is mainly used for projects centered on a noble cause. The donators can still be rewarded though; it just isn’t a necessity (as in case of Rewards-Based Crowdfunding).

When to use the Crowdfunding Marketing Approach?

Even though Crowdfunding has gained prominence over the years, this approach should be used very carefully. There are upsides to launching a successful Crowdfunding marketing campaign, but there are downsides as well.

For example, in equity Crowdfunding, you have to share all confidential as well as public details of your business with the stakeholders.

As for Rewards-based Crowdfunding, the rush and pressure to give back to the donators can be energy-consuming and shift your focus from the tasks that require utmost attention.

So, don’t just get lured into the Crowdfunding trend. Make sure that you select the right type of CF approach for your business, take into account the pros and cons associated with it, ponder on if you will be able to handle the stressful aspects of the approach while driving your business to success. Once you are fully sure about what you are getting yourself into and that it is exactly what your venture needs, only then you should sign up for availing this service.

Planning an Effective Crowdfunding Marketing Strategy

Crowdfunding doesn’t automatically guarantee successful results. Your ability to craft an effective Crowdfunding marketing strategy defines how far you will go. You can follow the below-mentioned steps to get a better idea about kicking off a fruitful Crowdfunding campaign:

1. Research your Audience as well as International Markets

2. Choose the optimal Crowdfunding platform (there are many!)

3. Establish connections on social media

4. Create your own website and publish blogs

5. Ensure that your timing is on-point.