CROWDFUNDING – Why You Can’t Afford To Ignore Crowdfunding

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By Angela Scott-Briggs
Posted on January 24, 2017

The year 2016 was great for crowdfunding, be it lending, equity or reward-based. 2017 is also expected to see crowdfunding industry flourishing all around the world, showing double or even triple digit growth rates in several markets, from the UK to the US to China. According to CrowdFundBeat Data Center, the global crowdfunding market will grow at a CAGR of 26.87 percent during the period 2016-2020.

According to a report by The Crowd Data Center, crowdfunding is more effective in providing more money to businesses than government’s program in the UK: 40 percent more funding last year than the government funded Start-up Loans scheme. This shows that entrepreneurs are turning to crowdfunding as a way to raise capital and avoid barriers and exorbitant interest rates associated with conventional forms of funding. For example, food entrepreneurs are using crowdfunding to get funds for a food truck. Game inventors are usin g crowdfunding to get their first products out the door, while musicians are using crowdfunding to get an album produced. In addition, on many crowdfunding platforms, individuals can offer gifts to funders for their big heartedness, like copies of game or music.

Marketing as a major reason for crowdfunding is also gaining considerable traction. Therefore, you should consider crowdfunding even if you don’t need funding. Last year, Indiegogo launched an offering known as “Enterprise Crowdfunding” to help huge companies launch products, conduct market testing and support new innovations. The company did that because many established enterprises were already leveraging the big Indiegogo audience for market testing.

Crowdfunding is turning out to be an effective tool for measuring market demand. Established companies and startups are using this path to introduce their product prototype or to gauge the market’s readiness for their ideas while raising funds. If a product or idea is getting the backers to give their hard-earned money with just some perks as an exchange, then this can be an indication of market readiness for a concept.

Good crowdfunding sites, such as Indiegogo and Kickstarter, can help you check product demand in a new market. Also, it can assist you to build a loyal customer base that’s ready to spread the word to other potential buyers. Everlane is an example of a startup that has used Kickstarter’s model to increase the size of its market. Everlane designs, manufactures, and sells luxury clothing items at a low retail mark-up through an online e-commerce website.

Crowdfunding sites are also used by businesses to capture customer feedback and responses. Traditionally, a company carries out a product and market research to gauge the acceptability of a new service or product before they launch it in the market. This is done through food taste test, surveys and more. Collecting, evaluating and analysing this data sometimes need sophisticated logistics and funding, making it an expensive activity. With crowdfunding, many people who support your fundraising project are already your company’s advocate or product’s users. When those people receive your new product, you can expect to get some essential feedback on what they think about your product.

In conclusion, entrepreneurs are using crowdfunding platforms to raise capital, conduct market testing and capture customer feedback. If you know of other ways in which crowdfunding is assisting startups or established businesses, just contribute by leaving a comment below this article.

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