Why Crowdfunding Isn’t Always the Best Way to Raise Money for a Business Venture

There is so much hype in the media at the moment about crowdfunding that you would be forgiven for thinking that anyone with a good idea could simply rally up the masses of people who contribute to things like Kickstarter and IndieGoGo campaigns and get started on whatever great venture they wanted. When you see the success stories, including people who raised literally millions or went over their targets by hundreds of thousands, it really can feel like something so simple anybody could do it, and that there are loads of generous people out there willing to help entrepreneurs achieve their dreams in return only for the end product and some novel merchandise.

Unfortunately, however, this is not the full picture when it comes to crowdfunding, and it is not the one size fits all solution to getting business capital that some people may think it is. Here we look at some of the reasons why using the big crowdfunding platforms like Kickstarter may not be the best way to fund your idea.

Crowdfunding on Kickstarter or IndieGoGo Is For Fixed Projects, Not Businesses

One misconception people often have about how sites like Kickstarter and IndieGoGo work, is that they can be used to fund a start up business. This is not technically the case. Crowdfunding on these platforms is only available for projects. If your business venture involves bringing something you have invented to market, or something like developing a piece of software, then this is a project with a fixed development schedule and an ending. This would be suitable for a crowdfunding campaign. If you simply want to set up a marketing company or some other professional services business that is not based on something that can be defined as a project and managed under the constraints of a typical project, then this kind of crowdfunding is not available to you.

Managing a Crowdfunding Project is a Huge Undertaking

Setting up your project on Kickstarter or your chosen platform is not trivial. You will need a well made video, for one thing, as these platforms tend to heavily promote the use of video to sell your idea to its visitors. While you technically can submit a project with no video, it is exceptionally rare for these to get accepted, and the quality of your video seems to play a big part in how prominently you get displayed on the platform’s site. If you don’t already have a video explaining your idea or a trailer for the thing you want to develop, this in and of itself can be a big project to undertake, and this is before your campaign even goes live.

Once you have a live crowdfunding campaign, you’ll have a set amount of time (usually a month or two) to bring in the money. Occasionally you’ll get people who actively watch Kickstarter for stuff they’d like to give money to, but most of your investment will come from people who you have reached in some way with your own marketing. You’ll need to have a good blog, do a whole load of social media marketing, and possibly even pay for coverage on relevant websites.

Of course, this is to be expected, but what many people forget is that doing this kind of marketing and giving updates to supporters throughout the campaign is a full time job – you won’t have much time left to actually work on your business.

What Are Your Other Options?

If it isn’t possible to do a crowdfunding campaign on a major project due to the nature of the venture you want to start, or you just don’t have the capacity to create videos and manage a campaign for a month or more, then you should consider other ways to get hold of the capital you need for your business. You can look for venture capital or ‘angel investors’, which would mean getting private funding in return for a share of your business Shark Tank style. You can approach your bank and ask for a loan, or get a specialized business loan from a financing company that deals in start up capital. You may also, if the capital you need isn’t very much, consider personal loans, especially if you can see yourself viably turning over enough revenue to pay them off quickly.

There are lots of ways to fund a business, so if crowdfunding isn’t for you, don’t be put off making a go of your venture!

Why Crowdfunding Isn't Always the Best Way to Raise Money for a Business Venture 2
He's an avid gadget geek and spends most of his time reading or writing.

More from author

Leave a Reply!

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Related posts



Latest posts

How The Pandemic Affects Loneliness

The loneliness epidemic sweeping through the country is getting worse, and its effects are starting to show. Chronic loneliness has been shown...

4 Benefits Of Assisted Living For Your Loved One

As your family member gets older, you may start to wonder whether they're getting enough of what they need at home. It's...

Understanding Retail Store Credit Cards and Their Impact on Your Credit History

Store credit cards are commonly offered with almost every purchase made by you at a retail store. The USP of a...

Want to stay up to date with the latest news?

We would love to hear from you! Please fill in your details and we will stay in touch. It's that simple!