There are many obstacles in your way before you can achieve your goal of opening the doors of your business and one of those is how to fund it.
The last ten years has seen larger numbers of individuals attempt to start their own business or become freelancers, but at the same time banks have tightened up their financing and many start-up businesses have no choice but to look for alternative financing to see their dreams become reality. Crowdfunding has become more popular in recent years as a way of financing your business, but what is it and how can it help you?
Increase Your Chances of Finding Investment
Crowdfunding allows members of the public to contribute small, online donations in return for a stake in your business. This can be as little as £10 per person and allows you the chance to attract a large pool of investors rather than be reliant on a much smaller number of large investors and the myriad complexities and nuances you can encounter going down that route.
Some investors might be reluctant to invest large sums of money into an unproven idea or service. With this in mind crowdfunding suddenly becomes a much more attractive option to source seed capital from a wider range of backers who are risking less in the process.
The Benefits of Crowdfunding
It’s low risk to set up a crowdfunding campaign. There are a number of different platforms you can use and the majority of them are free to publish your pitch, only charging a small percentage (usually 5%) of your total once it is reached. It is low risk as if your target isn’t met; you don’t need to pay anything to the crowdfunding platform.
Some people would worry about handing over some sort of control to investors but with crowdfunding you can offer whatever incentives and rewards you like to investors, such as personalised gifts or exclusive access to a certain product or service you plan to offer. So you can offer a different gift depending on how much someone donates to your cause. This also means that once your target is reached that is the end of the investors association with your business. For those looking to gain slightly larger investors, there are option to offer equity in your business and attract investors who could also potentially be useful to you in terms of their skills and expertise.
Crowdfunding is a great way to boost your marketing from the outset, creating a platform to raise awareness of your brand in the press and also encourage investors and future customers/clients that once you reach your target of investment there is real potential and a secure short-term future.
Lastly, crowdfunding is a faster pace of investment than more traditional avenues. Some start-up businesses have raised their seed money within a few days of starting an online campaign, and even with the recommended cooling off period to allow all investors to confirm their donations and for you to put in place the next stage of the process, this is far quicker than acquiring large investment from a small number of individuals and companies.
Crowdfunding as an investment opportunity is great for those start-up businesses that have a story to tell, a way of sharing their dreams that will entice investors big and small. You have to be prepared for the daily work of promoting your campaign and speaking to investors big and small about any questions they have. If you feel this is an avenue you wish to discuss we have experience in talking through and assisting many start-up business owners in realising their dream.
Back to Finance