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3 Benefits of Crowdfunding for High-Growth Emerging Startups

Crowdfunding has changed both the demographics and strategies of companies and individuals seeking ways to raise capital for their projects. Project funding ranges from $10 million for the wildly popular Pebble smartwatch (backed by 70,000 people) to $1,000-2,000  for smaller scale projects from artists who need money to launch their band’s new album or a film student looking to direct his or her first film. Crowdfunding continues to have a serious economic impact on successful projects.

A recent study conducted by Crowdfund Capital Advisors (CCA) – a leading global advisory and consulting firm – on early-stage finance initiatives including equity, debt and reward-based crowdfunding strategy and implementation found that 39% of successfully crowdfunded companies hired new employees, for an average of 2.2 new employees each. In total, 87% of enterprises surveyed either had or planned to hire new staff due to the influx of crowdfunded capital.

Beside the benefits to newly hired staff, here are 3 further reasons why more high-growth emerging startups should take advantage of crowdfunding resources:

1) Networking: Crowdfunding sites such as Kickstarter and Indiegogo allow exposure to millions of project backers and like-minded people. Angel investors and entrepreneurs looking to partner with other founders frequently visit crowdfunding sites, seeking the latest innovations. Funders bring important industry knowledge and experience to their chosen projects, whose value exceeds the monetary gains.

2) Learning from Other’s Experience: There is a lot of information to pick up from others on crowdfunding sites. Successful campaigns need polished presentations. This includes having a professional-level video showcasing why backers should fund their campaign. The copy and benefit statements also have to be simple, sincere, factual and engaging. Crowdfuning sites are breeding grounds for how to improve time management, planning, and most importantly, execution – which leads us to the next benefit.

3) Success Builds from Success: A well-executed campaign that delivers to backers on time garners more interest from different investors. According to the same study by CCA, “Success with crowdfunding opens the door to traditional forms of investment capital – allowing many firms to establish revenues, customer acceptance and demonstrate the ability to execute – thus gaining trust from established investors.” Angel investing can be seen as a gateway to venture capital, and crowdfunding builds another bridge between proof-of-concept and angel investing.

While the future of crowdfunding looks bright, it can create potential downsides to go with its many upsides. One problem it can create is the saturation of too many founders playing in a limited arena. Crowdfunding needs more niches that divide project types to equalize the playing field. This in turn can create a second problem of too few backers. However, crowdfunding has proven its ability to provide success as a platform and is here to stay. And according to Paul Sawers, “The one word we keep hearing in relation to crowdfunding is ‘democratization’. Banks and government-led schemes have long-been the source of finances for budding entrepreneurs in the past, but with billions of people connected to the Web through PCs, mobiles and tablets, the sands are shifting.”

Are you ready to put your idea out there and raise capital through crowdfunding? Download our free strategic communications plan template to identify your audiences and messaging to ensure a successful launch.

 

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