Traditional channels of capital available to entrepreneurs included friends and family loans, credit cards, personal savings, Angel Investors, and potentially, venture capitalists. Crowdfunding has opened up a floodgate of money into the entrepreneurial scene, but there are many other benefits to crowdfunding as well, as long as it’s done right. And to do that, you need the right type of crowdfunding support, and we have the resources here to help you reach your funding goals.
Benefit 1: Market Research
Market research is the art and science of learning about the market. Effective market research can help companies succeed by minimizing their mistakes, and learning how, when, where, and for how much customers want to buy products or services. Ineffective market research will not only waste money in the preliminary phases of research, but has the potential to send companies down a path that virtually guarantees failure. The real challenge with market research is that, whether it’s online polling, tele-interviews, focus groups, or other market research methods, the respondents may or may not be telling the full truth. It’s a psychological phenomenon: people want to be liked, so often they give answers that they think researchers want to hear, rather than what they may truly feel.
While non-traditional, we argue that crowdfunding is a very useful part of market research, since you’ll know very quickly whether people are willing to put their money behind a product or service, or whether they’re willing to pass it along on social media, or whether the response will be somewhat flat. Regardless, it may be a non-scientific method, but it does provide what some people might consider to be a very valuable litmus test.
Benefit 2: Connections
One of the underappreciated benefits of crowdfunding is the connections you’ll make. You might meet a mentor, an advisor, an investor, or a potential colleague while you’re out promoting to customers. If you have the passion for what you’re doing, odds are, other people do, too, and putting it out there through crowdfunding might just help make that connection.
In this series, Ecopreneurist explores best practices in crowdfunding, focusing specifically on startups in the sustainability, health and wellness space.
The crowdfunding economy has more than tripled in the last 3 years, with much of the money going toward social causes and mission-driven startups or products. Going forward, this trend will likely continue, and depending on the equity-based crowdfunding legalities, the industry may in fact explode.
Many crowdfunding projects fail, and many people are starting to get crowdfunding fatigue–truly good ideas sometimes do not resonate simply because they don’t reach the right audiences or because the company or individual launches the crowdfunding project too soon. This video post goes over some good advice to think through before jumping into, and pinning your hopes on, a crowdfunding pitch.
There are many ways to crack a nut. In this white paper from GreenBusinessOwner.com, the options for raising capital for small businesses are explored in-depth, with a particular focus on the advantages and drawbacks of doing so as a mission-driven business.