Crowdfunding is a way of raising finances by asking a large number of people each for a small amount of money.

Those seeking funds set up a profile of their project on a website and using the Internet’s worldwide reach they can reach millions of potential funders. They can then use social media, alongside traditional networks of friends, family and work acquaintances, to raise money.

This article will highlight 4 reasons why you as a company should consider crowdfunding. Whether it be to start a business or to fund a particular project Crowdfunding can help in numerous ways, and this is what we have covered in this article.

Hedge Risk

Starting a new business or a new project for your business always has elements of risk. Not only is finding the sufficient funding difficult but there are always expenses that are impossible to predict.

There are also challenges in knowing whether the product or your company is viable for your market, and finding an investor can be near impossible if you don’t know the right place to look.

Launching a Crowdfunding campaign hedges these risk by allowing you to gain market validation and avoid giving up equity before going all out and taking a product concept to market according to an article in Forbes.

Knowing whether people are interested in your product and are willing to invest their hard earned money gives you the confidence to go ahead with your idea knowing there’s minimal risk.

Instant Market Research

Crowdfunding allows you to get direct feedback to see what your audience or market want.

Using social media campaigns allows you to talk directly with your audience. Making this connection gives you an incredible insight into to their motivations. The better you know your market, the better you can target your advertising and give them exactly what they want. This research adds up to more money in your pocket.

According to Rutgers online, $10.7 Billion is spent on market research in the United States annually. This spending accounts for 10.2% of a company’s budget and 8.3% of a company’s revenue. When done correctly Crowdfunding can do the majority of this for you, saving you time and money.

One of the Fastest Growing Revenue Streams

Crowdfunding is growing at an incredible rate. Since the beginnings of Crowdfunding in 2009, a lot of money has been raised for numerous different projects. From smaller projects such as raising over $2k for youth gardens in Philadelphia, $36k for enhanced bike lanes in Denver, and even $1.2 Million for the lighting of Willie L. Brown Jr. bridge in San Francisco.

In 2010, $880 Million was raised in total through crowdfunding and that grew to $34.4 Billion raised in 2015. The average amount raised by a successful crowdfunding campaign is $7k.

In 2015 $58.8 Billion was raised in venture capital in the United States through crowdfunding campaigns. Today the average amount raised in venture capital funding every year is $30 Billion. Crowdfunding is constantly growing and it’s here to stay.

Gain Attention

Crowdfunding can help get your company or idea noticed. Done correctly, crowdfunding builds a rabid fan base of customers who like and believe in the project so much that they’re willing to pre-pay for your campaign.

Often, they do this without any kind of guarantee. This base then goes to become a fan or customer of your company. With this type of marketing, you can gain repeat customers with ease. In fact, according to The Balance, 32% of companies that used crowdfunding reported yearly revenues of over $100,000 a year since their Kickstarter campaign.

Additionally, if you build up an incredible campaign, which really picks up speed, this will gain the attention of media outlets related. This further pushes your campaign and your business up to another level.

Finally, many professional investors look at crowdfunding as a vetting process to see what new products are worth investing in. If successful, these venture capitalists are excited to put their money into a crowdfunded company

Conclusion

With this 4 reasons, you now have a better understanding of the benefits crowdfunding can have for your business and your product.

The popularity of this service is constantly growing and becoming the go-to way to get the funds you need for the service or product you provide.