07 Sep Crowdfunding For Established Businesses
Individuals who are new to the Crowdfunding industry will often assume that Crowdfunding is meant to benefit companies that are just starting out or firms that need seed money to launch their project. They might also assume that it is reserved only for very small companies that are trying to grow and expand in midsized companies. This assumption is highly misguided. There are a number of large corporations that have turned to Crowdfunding as a form of business finance. One such corporation is Cloudsona, a Silicon Valley firm that produces wireless wristbands. They wanted to produce wristbands that synchronized with light shows at concerts, clubs and sporting events. The company founders could have easily received funding elsewhere but they chose to use Crowdfunding instead and raised over $55000 from backers online. One may wonder why the founders who have deep rooted connections in Silicon Valley and who no doubt have friends and networks around them with deep pockets would turn to Crowdfunding. Answer is that there are many reasons for an established business to want to use Crowdfunding. In the war between traditional investment and Crowdfunding, finance seekers are opting to go with Crowdfunding as their preferred form of raising funds because:
- Traditional Venture capitalist firms may not e interested in the area the entrepreneurs specialize in. For instance in our case study above, VC’s were not interested in either hardware or entertainment. However, crowd funders are interested in owning cool pieces of hardware and entertainment is one of the largest industries due to consumer interest. Therefore Crowdfunding was the best fit because it provides a huge access to investors who are potential customers.
- The money one gets from Crowdfunding allows you to maintain creative control over your product and process and also management of the firm. Venture Capitalist money always comes with a lot of strings attached. Crowdfunding breaks down these barriers because one gets small amounts of money from people who are actually interested more in the product than they are in the direction of your firm.
- Crowdfunding a project allows the consumer to get involved with the project and provide input on how the product can be improved or better adapted for use. It puts the entrepreneur on a level playing conversational field with the consumers and target audiences.
- In our article Crowdfunding beyond money we highlighted Crowdfunding as a platform that the entrepreneurs can use to network and even build partnerships and collaborations. It provides the consumer audience to air their thoughts and ideas directly to the producers and be a part of the production process. This turns the consumers into loyal fans, or make them part of the business family.
- Crowdfunding is an exciting way to raise money and involves a lot of creativity. The overall teamwork, effort and cohesion that is required to achieve results like the funding goal and marketing the campaign is very beneficial to company in the long run.
It has been noted that established companies may achieve more success with Crowdfunding because 1. They already have a recognizable name and are well known. Therefore, crowd funders may find it easier to trust them. 2. They may be in a position to offer the backers more incentives as compared to smaller firms, in return for their donations. As the Crowdfunding industry grows, more and more medium sized and larger companies are finding it a better way to raise funds for their projects. To learn more about this, read how Big Brands are hopping into Crowdfunding.