Hey entrepreneurs check out the ups and downs of crowdfunding…

Entrepreneurship can be a tough journey.

Yet one you will cherish all the way.

Yes, there are many ways in which an entrepreneurial journey can be undertaken – in today’s tech-savvy times, there are many options for the entrepreneur to look at, in order to raise funds.

Enter crowdfunding; a unique way of investing in someone’s idea, concept or business.

Technology enables a platform that connects people and brings much-needed capital to startups and businesses hungry for growth.

Though funding is almost always the main goal of a crowdfunding campaign, it can also be a fantastic way to gain visibility, validate your business, grow your customer base, and more.

So, what is crowdfunding?

Crowdfunding is about persuading individuals to each give you a small donation – 2000Rs, 10000Rs, 18200Rs, maybe more. Once you get thousands of donors, you have some serious cash on hand.

This has all become possible in recent years thanks to a proliferation of websites that allow nonprofits, artists, musicians — and yes, businesses — to raise money. This is the social media version of fundraising.

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How does it work?

The most common type of crowdfunding fundraising is using sites like Kickstarter. In Sri Lanka, there’s CrowdIsland.lk, which is very popular among startups and entrepreneurs.

In crowdfunding, donations are sought in return for special rewards. That could mean a free product or even a chance to be involved in designing the product or service.

It is also possible to use crowdfunding to assemble loans and royalty financing.

The best method is to sell company shares or ownership stakes in the company on crowdfunding sites.

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Upside:

  • Crowdfunding provides another strategy for startups or early-stage companies ready to take it to the next level — such as rolling out a product or service. Before, a business owner was subject to the caprices of individual angel investors or bank loan officers. Now it is possible to pitch a business plan to the masses.
  • A successful crowdfunding round not only provides your business with needed cash but creates a base of customers who feel as though they have a stake in the business’ success.
  • It’s a place to build traction, social, proof, and validation. A strong, highly visible crowdfunding campaign can provide validation and social proof that’s vital in charting your path forward. When potential customers show interest in your startup’s product or service, you’ve generated social proof—demonstrating that other people believe in what you’re doing. Once early adopters vet and buy into your idea, others are more likely to follow suit.

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Downside

  • It will not necessarily be an easier process to go through compared to the more traditional ways of raising finance – not all projects that apply to crowdfunding platforms get onto them.
  • If you don’t have an engaging story to tell, then your crowdfunding bid could be a flop. Certain sites don’t collect money until a fundraising goal is reached, so that’s still a lot of wasted time that could have been spent doing other things to grow the business.
  • if you haven’t protected your business idea with a patent or copyright, someone may see it on a crowdfunding site and steal your concept

Here are more factors that can better ensure a successful crowdfunding campaign:

  • Have at least a small network of enthusiastic friends and family willing to help get the ball rolling by giving and urging others to give.
  • Present a serious business plan and an explanation of why the money will take your enterprise to the next level.
  • Include a video pitch and keep it short and concise, with a call to action.
  • Be prepared to essentially live online, staying active on social media sites, until the crowdfunding campaign is complete.

Are you an aspiring entrepreneur or a successful one?

Share your story with us at theeditor@vyapara.lk.

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