So what exactly is crowdfunding?
Crowdfunding is a new way of raising capital for start-up and growing companies.
The concept is simple: a large number of people “the crowd” invest small amounts
of money to accumulate into an investment large enough to finance the start-ups
growth funding requirements.
Small efforts yield greater results…
Crowdfunding is based on the principle of “crowd sourcing”. Crowd sourcing is
where a large number of people all put a little effort into reaching the result. In
Crowdfunding, a large number of people invest small amounts of money in order
to reach the required investment target.
Bypass financial institutions and go direct to the ‘crowd’…
Crowdfunding bypasses the financial institutions and allows the entrepreneur to
go direct to the crowd and raise money directly from individuals, typically through
the Internet. The Internet makes communication between entrepreneurs and
investors very easy. Crowd funding makes it possible to find those investors and
invite them to invest in your company. Having a large number of small investors
also helps with the marketing of your business. There is the great potential for
these investors to become “brand ambassadors” and help make your business a
‘Must have’ elements…
The one “must have” operation which forms a significant part of your fundraising
exercise is a strong “social media campaign plan” in order to target, communicate
and connect with potential investors. A well-prepared plan will reap major
dividends for your fund raising activities and do not underestimate the power of
social media as part of your marketing mix.