3 reasons for considering crowdfunding

I recently attended „The Funding Event“ organized by the Amsterdam Center for Entrepreneurship (ACE). The event, from which I learned several valuable insights, introduced Leapfunder, an Amsterdam-based crowdfunding platform primarily designed for angel investors (Leapfunder, n.d.). This blog post lists three reasons why startups offering viable products or services should consider crowdfunding.

1. Free publicity

Whenever one visits crowdfunding platforms one experiences a new wave of products or services offered by previously unknown startups. If the products and services were designed for the target market to which one belongs, then chances are high that visiting the offer results in an actual buying interest. Startups receive free publicity from curious minds attracted by the platforms. Nevertheless, the cost of the associated marketing is usually included in the fee that startups pay when they receive their funding. Interestingly, by browsing through crowdfunding platforms, visitors are exposed to novelty, which releases dopamine and implies an addictive element (Heshmat, n.d.). As a result, visitors tend to visit the platform regularly and startups can expect progressive free publicity if they consciously choose to market themselves constantly on crowdfunding platforms.

2. Test marketing

It depends on the industry of the startups whether test marketing is possible (Cadbury, 1975). However, test marketing is a crucial element to predict the product or service success and there are two reasons for it: 1. It gives an indication on sales performance and 2. Management can conduct a SWOT analysis based on the outcome of the crowdfunding campaign. Afterwards, adjustments can be implemented if necessary. Nevertheless, if test marketing is successful, then it is wise to introduce the product or service as fast as possible as otherwise competitors will take the leap. If not successful at all, then founders saved themselves from investing heavily with private funds in products or services that are not fit for the future.

3. Networking opportunities

Entrepreneurs often go to business-related events to meet other entrepreneurs and extend the network. Most of the times, this is how one creates most opportunities and meets the most interesting professionals of the region. While being present on a crowdfunding platform, startups can grow their network through an enormous market reach. Other professionals can simply contact the startup for collaboration purposes.

Finally, if startups decide that crowdfunding could be a viable option, then it is recommended to research how to set up and launch a successful crowdfunding campaign.

References

Cadbury, N. D. (1975). When, Where, and How to Test Market. Retrieved April 01, 2016, from https://hbr.org/1975/05/when-where-and-how-to-test-market

Heshmat, S. (2015, January 22). The Addictive Quality of Curiosity. Retrieved April 01, 2016, from https://www.psychologytoday.com/blog/science-choice/201501/the-addictive-quality-curiosity

Leapfunder. (n.d.). Retrieved April 01, 2016, from https://www.leapfunder.com/

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