Crowdfunding / Will You be My Financial Angel?
Imagine such a scenario: you have a unique idea, the plan on how to execute it, but one important element is missing - financing. You start wondering “should I take a loan, what interest rates will I get, is my idea really outstanding? Naturally, you start doubting whether the risk is worth taking it. I believe that a lot of unique ideas are deep under the grown in the end due to considerations. BUT. Everyone currently is talking about crowdfunding. Could it be your saviour?
by JULIJA BLAZAUSKAITE
To start with I am not sure whether all of you are familiar with the concept of crowdfunding. If you know what I am talking about you can certainly skip the following paragraph and save some time for Facebook scrolling, haha. However, if you are still wondering “what she is talking about?”, follow me a bit further to find out more about the peculiarities of crowdfunding.
So, crowdfunding, like most of the other genius ideas, has one common feature - simplicity. It uses a fund, which is collected by a large number of people with relatively small contributions. Nowadays, this model uses platforms, which function like mediators and essentially connect creators with investors. As it looks like a new idea for a business, the roots of this phenomenon could be actually found in Ireland, already in the 18th century, when loans were given for low-income families. Interesting fact – till the late 20th century, crowdfunding was related to micro-finance, but in 1997 the music group called Marillion decided to raise some money for a reunion concert and collected $60,000. This gave an impetus for the era of crowdfunding, which we have today.
As digital age get the passe, more and more platforms are opening up in order to bring together inventors with investors. Interestingly, so many types of crowdfunding exist, from which the most popular one is reward-based. This method grants a certain type of goods package or benefits for your donation and support of an idea. Of course, I need to mention that others argue that the equity-based type of crowdfunding, which is similar to the stock exchange where investors can buy a part of the start-up by financing its costs of launching, is the other top choice while supporting the new ideas by using crowdfunding.
Obviously, not everyone seeks to make some money out of this and some “angels” choose more altruistic ways to help our society to tackle various problems. Although donation crowdfunding could really let us become the guardian angel to those who really need some kind of help. And in the endless space of the Internet, we can definitely find even more forms of this supportive financing way. Check out platforms, such as Kickstarter, Patreon or Indiegogo to choose the right one for your fund-raising in order to reach the audience, which could help your project to become live.
Crowdfunding indeed might look like a magician, who could help your things to work out. Despite that, you still should think about some risks and gains before diving into the new fund-raising project. As crowdfunding looks like the fast way to grow funds, it is not always the case. As crowdfunding guru, Anne Strachan, states “Crowdfundable projects are visible, finite and understandable. If your project isn’t all three, it’s unlikely to succeed.” In addition to that, the world is full of “copyists”, the ones who seek for the quick success of the project and are willing to steal your concept without any regret. Thus, make sure that you have your copyrights and a unique/ exclusive idea.
I hope that I do not frighten you because there are still plenty of crowdfunding benefits. It is a great way to market your idea and get huge amounts of attention. Moreover, you can better understand what your customers’ needs are and get some valuable feedback on how you could develop further your exclusive idea. Lastly, this financing way helps to reach out your niche audience, which could be hardly recognized before by testing whether your idea is truly fascinating.
Various industries apply crowdfunding and while exploring this phenomenon I found some interesting cases in the fashion industry as well. What astonished me the most was the way reward-based crowdfunding has been applied. The designers were looking for „investors“, who would support the project by giving the financial reward for the chosen product, which they would receive if the designer managed to collect the set amount of money. This model gives the possibility for designers to estimate various criteria, such as the most popular garments, colours etc. When relying on these parameters, the apparel industry could become more sustainable by decreasing the risk of too high overproduction and getting an opportunity to measure the demand. Moreover, as sustainability is becoming a really critical aspect of production, reward-based crowdfunding could play quite a significant role in decreasing pollution by producing the exact amount, which is demanded by consumers. And the most relevant to us, consumers, the better quality products could be offered due to decreasing costs of overproduction. Wow, it looks like a win-win situation, isn’t it?
Crowdfunding is a tempting financing option, especially when it is free. However, do not forget that if you want to achieve success, your idea should be truly unique. So, maybe you are the next crowdfunding star huh?