Even when you’re armed with an incredible new business concept, sometimes it’s flat-out impossible to secure funding through a standard high street bank. As the global economy continues to draw lessons from the most recent credit crunch, even the biggest institutions are afraid to lend large sums of money to untested entrepreneurs. Without a solid business plan, most banks are bound to show you the door before you even start your pitch.
Yet if you turn to the web, you might find there are plenty of web users who are willing to lend or donate very small amounts of money to your business. Every cent adds up – and if you play your cards right, your business could be up and running in no time.
What is crowdfunding?
Although crowdfunding has only recently exploded into the mainstream, the concept has actually been around for quite some time. In fact, New York’s iconic Statue of Liberty was made possible through a massive crowd-funding campaign that was started by a local newspaper in the 1880s.
Modern day crowdfunding is utterly simple. With sites like Kickstarter, Funding Circle and Zopa, millions of users from across the globe can troll through pages upon pages of startup concepts – pledging anything from a few pounds to full funding at the click of a button. Last year, the crowdfunding market grew by over 90 percent, and it’s not hard to see why. If executed correctly, the results can be staggering.
Take the example of the Oculus Rift project – a group of techies that sought to create the world’s most advanced virtual reality headset. After launching a Kickstarter campaign goal of just $250,000, the company’s founders were shocked when the idea gained over 9,000 backers willing to provide $2.4m in funding. Today, Oculus has got offices across the globe, partnerships with top tech giants and a thriving R&D department. Without thousands of everyday web users, that wouldn’t have ever been possible.
Is crowdfunding right for my company?
Crowdfunding campaigns may be trendy, but it’s worth pointing out that a large number of startups never even come close to nailing the funding they’re looking for online. Because the market has grown so rapidly over the past year, mainstream sites like Kickstarter are incredibly competitive – and unless your firm has got a rock-solid pitch, even the best startup concept will drown in a sea of identical propositions.
If you’re serious about going the crowdfunding route, the first step is ensuring that you’re able to grab the attention of your target audience. That could mean short, snappy product descriptions, a vast selection of high-resolution images or simply a well-worded background story. Many startup veterans will attest that the most vital aspect of a crowdfunding pitch is not a product description, but a snapshot of the individual running the campaign. Before committing money, would-be investors want to know whether they can trust the person at the wheel.
The crowdfunding model has still got a few kinks to work out. Yet if implemented correctly, a crowdfunding campaign could land your startup with the influx of fresh capital that most mainstream banks wouldn’t be so keen to hand over. Just remember: there’s a lot of competition out there, and only the most aggressive crowdfunding campaigns are bound to succeed.
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