The idea of selling your product while it’s still in development may seem like a crazy idea to some. How do you build demand for your project when it doesn’t really exist yet? The idea isn’t as crazy as it seems; there are a large number of investors looking for the next big product or service to take over the market. Crowdfunding can go a long way towards meeting your financial goals for your project with mitigated risk.
What is crowdfunding, exactly? By definition, it’s the practice of funding a project or venture by raising many small amounts of money from a large pool of investors. In in this topic we’ll be highlighting some of the reasons why you should go with crowdfunding.
Raising money without giving away shares in your company
You can offer discounted rates on the project to help raise interest and funding instead of having to offer percentage of profits. Traditionally, you would spend months combing through your personal network, connecting with potential investors, and investing personal funds to pitch to them. Previously, royalties or company shares would be the initial compensation for project funds but with sourcing your fundraising to a larger pool of benefactors, the compensation is spread more evenly. The other alternatives would be raising your own funds personally or applying for a loan. Neither of these options are as low-risk as raising your project funds through crowdfunding.
Great way of early market testing your product
By putting your project up for crowdfunding, you gain an early advantage of would-be backers asking tough questions about the product and offering early analysis of your presentation. You start off your project with an idea of what your targeted market is looking for. It really is great to be able to engage your future customers and field their questions or ideas. Perhaps your company’s next great idea can come from someone that on the outside.
Early product testing in-house can cover most of the hiccups during your project’s development. However, having outside sources providing you feedback on the service will help to speed up the process. You indirectly open up the pool of investors to becoming market researchers for your company. This can speed up the testing and development process of your venture, leading to meeting your goals on time and satisfying the demands of the investors. By keeping in constant communication with the crowdfunding investors, you create an open channel for constructive feedback and analysis – all without spending more on resources.
Start branding your company
Creating a platform for putting your project up for crowdfunding can have the added effect of early marketing and exposure. More eyes are drawn towards your campaign and you can create a long lasting brand that is attached to your business. Your potential investors can also turn into long term business associates and your project can even be picked up by interested media companies. Before your project even goes live, you could possibly have a long line of interested customers that already know a lot about your project. The added incentive of discounted rates through crowdfunding should also draw more eyes to your product.
Experience for future products and services
Crowdfunding does carry its own share of risks. If you fail to meet your fundraising goal in a timely manner, you may be subject to compensating your initial investors for the delay. However if the project is successful, you will have gained a wealth of experience that you can carry into your future ideas. The pool of investors that you gain from your first project then turns into a resource you can count on as interested benefactors for the next project in the works. These investors will help you build momentum into your next business venture by sharing your products and services through word of mouth. These adopters also develop their own personal commitment to your company’s success.
If you have a promising idea that you want to see through to a viable business venture, consider using a crowdfunding campaign to raise the initial funds.