Is Crowd Funding a Viable Option for Building a Small Business?

Comprehend the role of Crowdfunding in raising capital for the business venture
  • BY Jaspreet Kaur

    Feature Writer, BusinessEx

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  • Oct 25,2018
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  • 10 Mins Read

Setting a business of one’s own is a dream that many individuals aspire today. Owing an enterprise gives a sense of liberty, independence and makes one a risk-taker. However, while stepping on the ladder of the entrepreneurial journey it becomes extremely difficult to actualize the envisioned dream. Capital is the main obstruction that prevents aspiring entrepreneurs to execute their business idea in reality. It is widely known that apart from a good business idea, capital is the second utmost thing required for a business to get off the ground.

Owing to this challenge, many aspirants seek the help of banking institutions to borrow loans. However, not all loan seekers fulfil the banks’ criterion and unproblematically acquire loans. For such individuals, crowdfunding is deemed an easier and less risky way to gather money.

Crowdfunding- the Right Funding Source

Unlike other funding sources, crowdfunding is the mode of raising money for the business by approaching closed kin, investors and venture capitalists. It is primarily done by addressing a large number of individuals via social media networks and persuading them to invest in the business venture. This type of funding source requires good marketing as well as enhanced networking skills.

According to the Statista, “Crowdfunding is the collective effort of a large number of individuals who network and pool small amounts of capital to finance a new or existing business venture. Each campaign is set for a goal amount of money and a fixed timeframe, each day is counted down and the money raised will be tallied up for visitors to follow its success.” “The change of financial climate following the 2008 financial crisis has given rise to the culture of crowdfunding. The stringent post-recession lending policies perused by banks and the resulting difficulties experienced by small businesses to get credit have compelled people to seek means of alternative lending as a way of sidestepping bank loans. The amount of money raised through crowdfunding worldwide grows from year to year.”  

How to Receive the Best Results from a Crowdfunding Campaign?

In order to receive good outcomes from a crowdfunding campaign, it is important to execute the campaign in the right manner by adhering to a step-by-step process.

  1.    Search the Right Crowd

The word ‘crowdfunding’ is indicative that the fund is endowed by a substantial amount of population. In reality, it is difficult to garner a crowd that shows interest in one’s business venture. An individual has to strive to garner and establish a wide network of investors, capitalists and business personnel who, in turn, demonstrate interest and invest in the business venture in small irregular amount.

  1.    Keep the Connection Intact

Once the network is created, many aspirants consider it is easy to effortlessly climb the rest of the steps of the ladder. However, this notion is entirely wrong as forming a wide network is not the one-stop solution to all problems as maintaining those numbers is essential for the business.

This can be done if the loan seeker connects to the crowd on regularity, shares business prototypes and gather their feedback. These functions will certainly help the crowd keep contacted with the loan seeker.

Keep these steps in mind and augment the reach through the crowdfunding campaign.

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