Remember, for your business to be successful, your customer’s life is your business’ life and crowdfunding lets you discover what that life looks like. Home » Business Cycle » Should you crowdfund? Crowdsourcing, which typically refers to the practice of soliciting services, ideas, or content from a large group of people online, was coined by Jeff Howe in a 2006 article in Wired, and crowdfunding was created by entrepreneur Michael Sullivan in that same year. As a campaigner, it might be easier and less risky to go with flexible funding (i.e., receiving funds as they come); however, regardless of the amount raised, campaigners must still deliver on any promises made. If you’re crowdfunding a furniture store, those who donate $50 might receive a small piece of décor; those who donate $500 and up might receive a piece of furniture like a footstool or bookcase and those who donate over $1,000 receive a custom-designed piece. The smallest slice of the crowdfunding pie, equity crowdfunding nonetheless … Like any endeavor, crowdfunding has its shortcomings. Business owners miss out on such mentorship when they ignore traditional investors and turn to the crowd. Crowdfunding provides a forum to anyone with an idea to pitch it in front of waiting investors. This approach taps into the collective efforts of a large pool of individuals—primarily online via social media and crowdfunding platforms—and leverages their networks for greater reach and exposure. Series A financing is a reference to the first round of financing undertaken for a new business venture after seed capital. Crowdfunding dates back to the 1700s. If you’re crowdfunding a furniture store, those who donate $50 might receive a small piece of décor; those who donate $500 and up might receive a piece of furniture like a footstool or bookcase and those who donate over $1,000 receive a custom-designed piece. They may have been burned by partners, donations or investors before and have a difficult time, trusting those who could harm their venture. When you use crowdfunding, you can polish your presentation by getting a look at what you provide from the top level. This is appealing to both parties involved in a crowdfunding for business effort; it negates the risk of depending entirely on one or two sources (like venture capitalism) and spreads the financial labor across a wider field. Crowdfunding websites such as Kickstarter and Indiegogo attract hundreds of thousands of people hoping to invest in the next big thing. GoFundMe is another popular crowdfunding site, although it focuses more on charity and individual causes than businesses. Ready to raise the capital your business needs? Successful crowdfunding platforms also make it easy for users to invest and provide some type of reward or return on investment as an incentive. getting the rewards or returns wrong can mean giving away too much of the business to investors; For a comprehensive overview of crowdfunding as an alternative form of raising finance for your business, see Nesta's (National Endowment for Science and Technology and the Arts) guidance on understanding alternative finance. When you streamline and focus your fundraising efforts, you eliminate a lot of the legwork that goes with approaching different sources of revenue. You may choose to provide something small to those who make particularly high donations, but money is contributed in the true sense of the term: Your backers don’t expect anything in return. 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