To start a business, crowdfunding can be a less risky way to attract investment, as you do not lose ownership of the company by selling shares. You get the investment and keep the company at the same time.
However, in the case of crowdfunding for a share in the project, the rules are different. You will still be dealing with a group of people who are subsidizing your private company, but each of them will be rewarded with share capital for their contribution. The rules of crowdfunding on shares depend on the country you are in, as that area is regulated by securities law.
Meanwhile, crowdfunding remains the best way to attract investment for other reasons.
Crowdfunding is very useful because it allows the startup to reach out to accredited investors or ordinary people who believe in your ideas and are willing to invest their money in them. Not to mention that it helps to test the product before the launch.
Before entering the market, it is important to make sure that your idea will sell. When choosing a crowdfunding platform, you will be able to communicate with its users, answer their questions, listen to reviews and comments about your product. Being able to talk to your prospects before scaling is invaluable.
After testing the market, you should use this information to form more accurate customer models, navigate marketing channels better, and continue to test new markets and ideas.
Marketing ideas and buyer models
Market testing gives you an idea of customer behavior. Based on this information, you form a clear picture of how your potential customers perceive your idea.
If they find it difficult to understand your idea or they are not interested in it, you may want to review your project. This is how you will be able to turn your product into one that will be sold.
Many startups use this method to gain a better understanding of the market and lay the foundation for future PR campaigns.
Building a community of brand evangelists
Crowdfunding will allow you to find people who believe in your idea and will support you throughout the development process. These people are also likely to invest in your future ventures.
In addition, they can be useful for promoting your product on those channels to which you do not have access. Rumours about interesting projects spread quickly, and you will soon find that your campaign is being discussed in the media.
Why are people interested in crowdfunding?
Why do people voluntarily spend their money on crowdfunding companies? Why do they do this, even if they are not accredited investors who receive shares? Well, for many reasons.
Dissemination of innovations
Depending on how early a person uses a new and innovative product or service, it can be classified into one of 4 categories.
Early followers try not to miss any opportunity to take part in something new, something that can be advanced, innovative. These are people who believe in your idea from the beginning, even before it becomes popular. If they find your product interesting, they want to make sure they get access to it early and make a donation in exchange for a prototype.
A great example – people who do not mind to spend a few days in line to get a new Apple product among the first. They will do their best to touch the latest and most advanced technologies before others.
Later, the majority and the lagging behind are people who will accept a new product after a certain period of time (when it will no longer be new). They wait until the technology is tested by other buyers and confirm its quality and claimed characteristics, and only then buy it.
Like-minded people are the solution to problems
There are people who feel part of the community and are somehow connected to the entrepreneur or what he is trying to solve. When empathy arises, they tend to feel obligated to help and donate money to a good cause. This act brings people a sense of satisfaction and participation.
Some people share money because they have an interest in the final product or they just like the idea and want to see it successful.
iBiT Progress Software Development Team