Published on March 6th, 2014 | by Jose Vasquez3
What the Boom in Crowdfunding Means for Startup Tech Companies
Recent data illuminates the recent rise and sheer potential of crowdfunding as a means of raising capital for businesses and individuals alike.
Crowdfunding certainly isn’t new, but recent information suggests that its popularity is rising more explosively than previously thought. By collecting small contributions from a wide audience of contributors, crowdfunding has become the capital-raising method of choice for entrepreneurs, especially those with limited access to resources.
In the last three years, the amount of money contributed to crowdfunding efforts has more than tripled. In 2013, over $5.1 billion was spent, distributed amongst entrepreneurs and others with online campaigns. And crowdfunding certainly doesn’t show any signs of stopping. New crowdfunding-specific platforms are regularly emerging, and demand for capital in both the business and nonprofit world is not going away.
So what does this mean for startup tech entrepreneurs and aspiring entrepreneurs?
The old ways of raising capital are virtually dead. Aspiring entrepreneurs are no longer slaves to the potential individual investors who would invest hundreds of thousands of dollars or more in exchange for control or eventual financial return. Instead, micro-donations are the norm, and in exchange, entrepreneurs can set their own expectations. Instead of sending out monthly reports to a handful of angel investors, entrepreneurs are often on the hook for nothing more than a free product once it’s been fully developed.
The only problem is getting momentum for a campaign once you start. The biggest complicating factor of this rise in popularity for crowdfunding campaigns is the sheer number of competing campaigns you’ll be dealing with.
As with ordinary competition, the best way to deal with it is to make yourself different. Find a unique selling proposition, something that makes you stand out from any other campaign on the web. Offer your customer true value that they wouldn’t be able to find anywhere else. Circulate the message as much as you can through social media platforms and press releases, and engage with your central audience.
If you’re in the market of raising capital for your startup venture, think carefully about how you’d pitch your campaign to your audience. If you make it valuable for even the smallest donations, crowdfunding is likely the way to go.
Check out the original infographic here
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