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Thursday, October 4, 2012

Crowd funding tips for a start-up venture

Crowdfunding gives every-day people the opportunity to invest in a new business or product. Though unconventional, there are a number of benefits associated with crowd funding which extend well beyond generating enough capital to get your start-up venture off of the ground.

Potential client feedback

Crowd funding websites can often be used as a focus group of sorts. Potential clients are exposed to a new business or product. As a start-up business owner, you can use a crowd funding campaign to figure out if your intended client base is willing to spend money on what you have to offer. Several crowd funding websites also allow investing users to provide feedback on the perceived advantages and disadvantages of a business.

Marketing and sales practice

Every time you put together a crowdfunding campaign or participate in follow up communications with prospective investors, you will hone the marketing and sales skills which are necessary for growing your business and driving profits. As the campaign progresses, you will fine tune your marketing tactics to suit the people who show the greatest interest in your products or services. The sales techniques developed through crowd funding will help maintain and grow sales forecasts by informing you how to sell your product to customers later.

Get to know your market

Crowd funding can also give you an idea of the size and demographic of the market your new business is best suited for. One of the most common mistakes new companies make is pouring too much money into products or employees due to an overestimation of the market size. The response you receive from crowd funding can help you determine how large of a customer base you will be dealing with at first.

Increased organization

Many new businesses struggle with developing an organized internal structure and that remove focus from other important parts of starting a business, like networking and fundraising. A crowd funding campaign requires organization within your start-up business. While running the campaign, you need to have concise mission statements, product descriptions and business models prepared for potential investors.

Confidence building

When members of your new business’s target market invest in your start-up it increases your confidence in the business model you have created. Any successfully secured capital creates good will in a new company, but when it comes from the general populace there is another level of confident satisfaction achieved.

Crowd funding is a great way to raise money for your new business while learning valuable lessons that will continue to be useful long after the financing phase is complete.

About the author: Danny has been working in the financial industry for over a decade. He currently works for Factor Funding Co, which provides cash flow solutions for growing businesses.