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Crowd funding is an old-fashioned concept that has pushed forward several of the world’s most exciting historical projects. In the 1800s multiple investors financed the construction of Lady Liberty’s pedestal. In the pre-digital world, raising financing from multiple investors was limited by the boundaries of social access.
By 2011, the concept of crowd funding was resurrected by the digital marketplace. By 2012, North America’s timeous implementation of the JOBS act turned hyper-funding into an officially recognised industry guarded by law. The massive proliferation of crowd funding sites caused a slow but certain boom, as access to fresh capital breathed life into industries that had previously struggled to find financing through traditional methods.
Passion
There are some industries that crowd funding is particularly adept at harnessing. Because financiers are presented with personal incentives rather than shares related to their funded project, they tend to choose ventures that incite passion, making science, innovation and the arts prime industries that attract the interest of the crowds.
This not only helps to gain financing from interested parties but also gauges public interest in the project. Whilst no opportunity to conduct market research should be ignored, it’s imperative to separate authentic target demographic research from data collected through crowd funding sites.
The mere process of generating crowd funding interest is an opportunity to whip up consumer curiosity and kick-start a venture before it begins. Those willing to support a concept financially are more likely to support it as loyal consumers too. This tendency can be exploited by offering post-release updates, accessories or micro-transactions to incite long-term fidelity in donor-clients.
Today’s markets are increasingly reliant on developing authentic relationships with committed consumers. Entrepreneurs can start early by forging strong relationships with emotionally-invested consumers during the fund-seeking process.
Connect With An Audience
When a concept hasn’t yet progressed beyond a crowd funding campaign, only the most skilled marketing analysts will be able to predict the level of funding the project will attract. As with any start-up campaign, it is thus advisable to create a series of benchmarked goals to measure progress by and allow for adaptations that don’t stray far from the original aims of the project.
When a defined measure of progress exists, a highly resonant project that generates more funds than anticipated will not lead focused entrepreneurs astray. Whilst there should be room cleared for a certain level of adaptation, the core goals should remain as measures of progress. Unlike businesses funded by venture capitalists, crowd funded concepts are able to evolve and grow in relation to increasing provisions of funds.
Drawbacks
The fact that running a crowd funding campaign costs little financially is one of its greatest pitfalls. With no outlay to motivate serious market research before publicising a plan, failures often leave entrepreneurs with dented reputations. These are not always easy to recover from.
Regardless of the simplicity and negligible costs involved in raising funds online, the bread-and-butter market and industry research entailed in generating traditional business plans should be conducted. Second chances are difficult to come by when aborted projects are resurrected.
Technological, digital, creative and scientific initiatives were, until crowd funding’s rebound, heavily reliant on a few wealthy and highly selective venture capitalists. The emergence of public financing via the digital marketplace has transferred power back into the hands of the crowds.
As thrilling as the concept may be to passionate innovators, it needs to be broached tactically in accordance with guiding investment and business principles.
This article was contributed by BusinessesForSale.com, the market-leading directory of business opportunities from Dynamis, the online media group also behind FranchiseSales.com and PropertySales.com
