How can crowdfunding help businesses

I was asked to write about crowdfunding. Considering that it is an investment channel that heavily depends on marketing, I considered it a great topic to add to this blog.

Crowdfunding is a method of raising capital by reaching to friends, family and customers. You advertise a product of service you are working on, and they invest in it in exchange for a percentage of profits or as a pre-order of the final product/service. A small help from many people is as good as receiving a big help from a small group of investors because:

  1. you are less dependent of a single source;
  2. builds you a network of supporters;
  3. raises awareness in a market of prospects;
  4. is a market study to test the viability of the idea;
  5. and the best part is, you already have some orders to show off.

From the marketing point of view, you are still promoting your brand and product. But it is also a sales channel. In fact, some businesses use a supposedly crowdfunding campaign to do regular sales of an already existing product.

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