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Wednesday 24 October 2018
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The importance of crowdfunding for Start-ups

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What is crowdfunding?

It is a process through which people give a small amount of money to collect a large amount of money usually for a cause.  It is kind of an alternative finance and crowdsourcing. There are several kinds of crowdfunding, online  being the main. It consists of 3 parties-the one that will be getting the money, the one that will be arranging the crowdfunding by providing a platform and the people who will be contributing for the cause. Crowdfunding is done for several causes including travelling entrepreneurial ventures, medical reasons and others. Crowdfunding is a very important way of collecting money.

Why is crowdfunding important and how long has it been around?

Crowdfunding is essential in places like India because most people are below the poverty line and can’t pay their medical or other bills. Crowdfunding in its raw form has been around for quite some time. Fundraising in India has also been a thing for a long time now. Crowdfunding has had its seeds in India too.  Fundraisers, fundraising in India have known to collect money from the people by displaying their medical bills for quite some time. However, doing it with the help of internet increases its legitimacy and makes everything happen in a more organised way.

Crowdfunding can also be essential if you are trying to start a business because crowdfunding can also increase the customer base and make more people aware of the initiative. Fundraisers in India especially, have been known to use crowdfunding to start their business ventures. One must however make sure how he is executing his campaign because a poorly executed campaign won’t garner a lot of attention. Start-ups need crowdfunding a lot because small businesses don’t usually have the money and people investing littles amounts to contribute to a start-up can literally be the reason for its success.

With over 93 billion raised from crowdfunding, more and more start-ups are relying on crowdfunding for their capital and success. It makes their life a lot easier and with people sharing their work, it even gets them the exposure they need to get their business to flourish. Crowdfunding is essential for start-ups these days for this reason. Social media makes it extremely easy for people to know and invest in start-ups. Crowdfunding not only helps with money but encourages artistes and businessmen alike. A few ways by which crowdfunding helps start-ups are:

  1. It provides access to capital. The JOBS act has made it increasingly easy for people in start-ups. The rules and regulations in the JOBS act help start-ups that are relying on crowdfunding.
  2. It minimizes risk. Since all the people will invest very little amounts of money, the overall risk will be low as well. It is a win-win situation.
  3. Since a campaign, if done correctly, will be shared widely, chances are one will get a lot of investors and will end up getting more than just the start-up money.  This money, one can use for other expenses that the business or one might need.
  4. The start-up will build an investor circle for the future if there is ever a need in the business.
  5. It acts as a marketing tool that increases organic visits to one’s platform.
  6. It gains credibility with proof of concept. Campaigns done online are far more credible than offline campaigns since all the proofs are available here.
  7. It introduces prospective customers to one’s venture and pre-sells their concept. It provides a lot of exposure to the business.
  8. It offers simplicity compared to other campaigns.