Why is crowdfunding great for startups?

Why is crowdfunding great for startups?

Finding investments is one of the biggest challenges in making a startup successful. Many startup founders are usually successful in achieving product market fit, hiring product engineers and learning about the format of cash memo or profit loss statements. However, when it comes to finding investments they usually struggle. This is why crowdfunding is so important as it opens up numerous opportunities for the founders of startups. If you are still new to the world of startups let’s understand why crowdfunding has become so popular lately:


1. It’s Less Risky

Startups can minimize risks by using crowdfunding platforms like Kickstarter and Indiegogo. By using these platforms, entrepreneurs are able to avoid some of the pitfalls associated with traditional venture capital investing, such as having to deal with lawyers, accountants, and others who could slow down or even prevent them from achieving their goals. Crowdfunding also allows entrepreneurs to keep control over their companies even after they have raised enough funding. For example, if a startup needs more money but cannot secure angel investors or institutional lenders within its budget range, it can still go ahead with its plans with the help of crowdfunding sites.


2. Helps You Gain Early Adopters

Crowdfunding is a great way to build momentum for your business and get feedback from potential customers before investing in the development of your product. However, this means that you’ll need to provide more than just a good idea—you’ll also need an actual working prototype that test users can interact with and see how well it works before making an investment in its future success as an actual product. Crowdfunding can be a great way for startups to get the funding they need. But it’s not just about raising money; it’s about getting your product in front of customers and learning how you can make it better before your first big round of VC funding.

Crowdfunding can help you do this by giving you access to early adopters who are willing to support your company, in its early stages. The early adopters are important in a product development lifecycle because they reflect the future customers of your company even though on a small scale. However, the most important role of an early adopter is spreading the word about your product once they see what they can do with it. These customers would later become investors or even employees at your startup down the line.


3. It's Accessible

Crowdfunding is accessible because anyone can create a campaign on one of the popular crowdfunding websites. The process is simple and straightforward, requiring little planning or involvement from the founder. It’s also easy to set up a campaign, allowing you to start collecting funds even before you have a finished product ready for sale.


4. Successful campaign is a proof of concept

As a startup, you need to show the world that your idea is viable and that there is demand for it. This can be done through crowdfunding campaigns. Crowdfunding lets you get pre-sales, which means that people are willing to pay money before they buy your product or service. This is crucial because you don't want to waste time and money developing something that people aren't actually interested in buying. Hence crowdfunding validates that your business is indeed needed in the market


5. Perfect for pre-sales

Crowdfunding in India is so popular because it has the potential for numerous pre-sales. Pre-sales are often used by startups as an "early access program" — meaning that people who pledge money will receive a product or service at a discounted price before everyone else does. Your crowdfunding campaign can be the perfect place to get some pre-sales through and start earning money.