Crowdfunding is becoming a major source of investment money as businesses of all sizes are raising millions of dollars to bring their ideas to fruition. Although crowdfunding was already becoming more popular, its usage has begun to explode with the passage of the JOBS act, which makes crowdfunding legal for limited equity transactions.
At its core, crowdfunding shakes things up by letting creators go public with their projects after soliciting donations from average Internet users. Not only does this bypass regular routes of investment funds, such as Internet angel investors and VC firms, but it also changes the world by encouraging the development of new ideas in the marketplace. In this way, crowdfunding is bolstering new ideas that might otherwise have never become popular.
The Power of Crowdfunding
Put simply, crowdfunding lets Internet users determine what concepts succeed and encourages competition between project creators. While some projects succeed in this model, many others fail. There are plenty of reasons for what does and doesn’t capture the attention of the public, but this system does consistently promise to deliver more value to the market.
Crowdfunding lets projects of all sizes compete for money. Projects created by communities and media publishers are given equal footing in their fields. On Kickstarter, for example, a huge array of music, publishing, film and technology projects raised hundreds of millions of dollars in funding in 2012 alone.
Key Crowdfunding Advantages
The crowdfunding system holds benefits for investors and creators. It lets creators measure consumer interest, and it makes promotion possible at the same time. This prepares creators to refine their marketing methods. Basically, services and products can be pre-sold to enhance market awareness and establish the intellectual property of creators along the way. At the same time, investors have the opportunity to contribute to the substance of products and services being promoted.
Biggest Benefits of Crowdfunding
For creators, crowdfunding is invaluable for its ability to enhance creative diversity in the market. Companies promoting projects in supposedly defunct areas are often surprisingly successful in their efforts. People who experiment but lack their own resources for development are often able to bring their ideas to the market this way. As a result, an explosion of creativity is developing as people are more willing to make something different with the knowledge that funds may be waiting in the way of crowdfunding. In this system, anybody with the vision and knowledge to develop an idea has a shot at success. Although crowdfunding isn’t compatible with all business models, it’s ideal for many. Rather than including only corporations with plenty of capital, it carries opportunities for regular people in the public sphere.
As companies and individuals build their ideas using millions of dollars raised through startup crowd funding, many people are rushing to get on board. Fortunately, there’s plenty of information about how to get started securing funds this way. No matter what type of project is being promoted, creators can gauge public interest and get a head start on making a dream into reality.
Kelli is currently blogging for an Internet Angel Investors company.