In this article, we are going to explore how Scruge will supercharge the creation of new ventures.
To start with, we’re huge believers that new enterprises play a key role in the development of economies around the world and there’s evidence to support this claim. For example, report on British startups by Virgin StartUp has found that British companies that exist 3 years or less account for 12% of the overall employment and 10% of GDP. Moreover, If you look at the 10 largest public companies, you’ll find that half of them were founded in the last 30 years.
While there’s undeniable evidence of the importance of startups for global growth, there’s also a problem that most startups fail. Of the top reasons that startups fail are that they run out of money and fail to attract users. We’re going to explore how Scruge can help startups with that.
Fundraising
The most obvious problem is that startups require capital to hire people, office place, run marketing campaigns and so on. Generally speaking, there’re two ways for startups to attract external capital: private capital and equity crowdfunding.
Private capital consists mostly of venture capital and angel investing. It’s a pretty hard way to raise money, partly because it’s still very geographically and network dependent and there’s well-documented evidence of bias, like this and this.
Another option is conducting a crowdfunding campaign on an equity crowdfunding marketplace. There are several problems with these marketplaces, namely location-dependency and cost. Most such marketplaces operate within a single country and don’t allow investors and companies from different countries. Another downside is the cost of having to comply with the regulatory framework, which exceeds $20k for most jurisdictions, and distracts entrepreneurs from building the product and attracting users. Moreover, this is a sunk cost, meaning that if a campaign is unsuccessful, startup won’t be able to recover the costs. The time and money can be, of course, spent on developing the product and hiring more staff, rather than giving away to middlemen. On top of that, the marketplaces take 6–10% of the raised money if a campaign is successful.
At Scruge, startups will incur zero costs of running a crowdfunding campaign besides their sweat capital. Our innovative crowdfunding model which prevents frauds means that entrepreneurs wouldn’t even have to set up a legal company. And unlike other crowdfunding platforms, we don’t take any fee, so all the raised money goes to founders.
This way, Scruge will allow founders to raise money without incurring any commission, upwards costs or ongoing fees.
Attracting users
With more and more services and applications appearing on a daily basis, it’s getting extremely hard to catch users’ attention. We think that one of the main advantages of crowdfunding is the ability to attract money from thousands of users. These users will own part of the product or company and thus will have “skin in the game”. This means that they’ll be interested in the success of the project they invested in and hence will exert additional effort by promoting it to their friends and by leaving valuable feedback on the product.
Consider the rise of popularity of Bitcoin. There’s no central company coordinating the marketing efforts, buying ads or anything. Rather it’s a self-driven phenomenon, which works by a person buying Bitcoin and telling their friends, and these friends telling their friends and so on. Bitcoin shows that the word of mouth is an extremely efficient promotion tool when people are incentivised in promoting the product.
With Scruge, individuals from all over the world will be able to invest in startups in a transparent and fraud-proof environment. This will allow startups to go global from day 1 and experience the power of word of mouth marketing.
To sum up, we have explored that Scruge is the cheapest way for startups to raise capital and discussed the power of crowdfunding in accelerating user adoption. We feel that a combination of a free fundraising mechanism and a powerful marketing mechanics of crowdfunding will make Scruge #1 place for user-oriented startups to raise money.
