Benefits of Crowdfunding for Entrepreneurs
Crowdfunding is the practice of funding a project or venture by raising money from a large number of people who each contribute a relatively small amount, typically with the help of Internet. Basically, it’s a mediator between companies who are seeking funds and people who want to invest.
- It provides access to capital
An entrepreneur may think that outside of their own network they can only raise capital from accredited investors, venture capitalists, and banks. This isn’t entirely true.
- Serves as a marketing tool
An active crowdfunding campaign is a fine way to introduce a venture’s overall mission and vision to the market, as it is a free and easy way to reach numerous channels.
- It hedges risk
Starting up your own company is a very risky and a challenging journey too. But crowdfunding campaign helps to hedge these risks and serves as a valuable learning experience. As it allows an entrepreneur to gain market attestation and avoid giving up equity before reaching a product concept to market.
- It is free!
If an entrepreneur sets a goal and doesn’t reach it, there is no such penalty. All the funds will return to each of the contributors, the entrepreneur doesn’t get anything and neither does the platform. On the other hand, if the fundraising project is successful, everyone wins and gets to be a part of a successful crowdfunding project. When successful, the average commission for the platforms is around 5% of total funds raised.
Crowdfunding is a superb step for entrepreneurs to receive the financing and direction they need in order to verify, execute and help their ventures to grow. It also allows entrepreneurs to raise funds from the community in exchange for simply giving their tangible products to the contributors.
With the Industry still developing and becoming more efficient, there is no better time than now to take advantage of the associated benefits.