You may or may not have heard of Crowdfunding. As the name suggests, it is the concept of a larger than normal group of people investing in your product/service. It is not a new concept but it has gathered significant momentum over the last 2-3 years because of the impact of social media and the vast number of online digital properties looking for funding.
Star Citizen - Star Investment
I doubt many of you have even heard of Star Citizen. An upcoming MMO (massive multiplayer online) which currently holds the record for the largest ever funding. $17m. Yes, $17m. Check out their initial listing on Kick Starter:
34,397 people invested over $2m in 30 days back in 2012. This figure has now risen to over $17.3m over the last 12 months. That is a serious investment.
Size Doesn't Matter
Star Citizen may have had made all the headlines but the size of the business and funding doesn't need to be on this scale. Imagine you have an idea for a Sushi Bar in Gibraltar. Easy source of materials and labour, large local and tourism trade and reasonable locations for the business. You need £300,000 to get the project off the ground. Attracting one investor may be bad for both parties. High potential risk for the investor, big gamble for you having a sole partner.
Through Crowd Funding you may be able to generate funds from 500-1000 people thus reducing their financial risk but also reducing your accountability to a sole party.
There are other advantages to Crowdfunding:
Visibility: your product/service is brought to market and viewed by hundreds of potential customers.
Engagement: you are able to engage with potential investors and customers across a broad range of subjects
Feedback: mostly importantly you get feedback on your product before you launch.
Be Careful of Strangers Bearing Gifts
As will all good businesses and ideas they eventually get copied or have the idea stolen. The key to crowdfunding is your visibility but this can also lead to potential competitors moving into your market before you are ready to launch. Unfortunately you will always have to deal with this if your idea is good.
Are you ready?
The question you should be asking is whether crowdfunding is appropriate for your business and whether you feel you have a product ready to be scrutinised at whatever stage you are at.