The Unexpected Benefits of Crowdfunding

 

In addition to the money provided by backers, crowdfunding can generate other, unanticipated benefits for small businesses. Two such benefits are 1) new customers and supporters, and 2) access to additional financing and specialized services.

New Customers and Supporters:

Everyone who contributes to a crowdfunding campaign is a potential new customer and loyal advocate for your brand. Not only are they likely to purchase from you in the future, they also are a source of great feedback.

You get amazing feedback by putting yourself out there. As a matter of fact, it allows you to study the feedback, make necessary improvements to the product, and then put the product out in the market. Yes, it would delay the launch of your product, but you are putting out a better product that your customers would like. But for this, you would have put out a less than perfect product, hear customer’s feedback, make necessary changes and then re-introduce your product. This would have cost you more money and time. Most importantly, you would have lost credibility.

More Money:

A crowdfunding campaign allows you to gauge the market and level of interest for your product. Bringing a new product to the market is very expensive. A crowdfunding campaign provides a validation process for your product. As mentioned earlier, it also provides valuable feedback so that you can fix problems before launching your product to market.

A crowdfunding campaign also allows you to raise more money from other sources. Once your product receives validation in the form of seed money, it becomes easier to raise money from secondary sources. This is necessary because most of the money you raised from your original crowdfunding campaign goes towards prototyping, free samples to backers and other expenses.

Once you raise initial capital through crowdfunding, it gets easier to find other funders. If you are a small business, successful crowdfunding can open up more financing options that may not have been accessible previously. Raising money from the crowd helps you improve your cash flow and customer base. It also makes you more attractive to lenders and investors if you’ve generated buzz and excitement around your business and product.

Specialized Crowdfunding Services:

Due to the popularity and effectiveness of crowdfunding as a source of much needed capital, many services have sprung up to help entrepreneurs manage their crowdfunding campaigns and their businesses — from setting up the campaign to promotion, and even product fulfillment. Sites like 40Billion.com make promotion easy by broadcasting your crowdfunding page to its large network of several million users across the most popular social networking sites for businesses – including Twitter, LinkedIn, 40Billion, and even Facebook. Innovative services like tweet ads and promoted company listings were created for crowdfunding entrepreneurs to tap into a growing, active network online without spending thousands on pay-per-click ads or traditional advertising.

Conclusion:

There are no guarantees when it comes to crowdfunding, and plenty of campaigns never get off the ground. If you decide to jump into the crowdfunding arena, know that it will take significant time and effort to reach your funding goal.
However, if you have the right story and strategy, crowdfunding can be a game-changing tool to help you meet your capital requirements, assess and spur customer demand, and gain access to new resources – including more financing, when needed.

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