Article Contributed by Carl Smith
Have you got a brilliant business idea that you’re just longing to implement? Are you in need of a bit of financial backing to help your business ideas come to fruition? If you answered yes to both of the above, then you may be interested to hear about crowdfunding, the latest way to help kick start your business off the ground and get it up and running. In this post we’ll be taking a closer look at what exactly crowdfunding is and how company Kickstarter has revolutionised the entrepreneurial opportunities for new business owners. Read on to find out how crowdfunding can help kick start your business.
What is crowdfunding?
Sometimes known as crowd financing, crowdfunding is the process of raising the necessary money to finance a business project or idea. The after effects of the recession have led to many banks turning people away when they approach for loans to set up a business. For that reason, Kickstarter.com came up with an alternative means of gaining the required financial backing, helping hundreds of thousands of young entrepreneurs see their ideas come to light.
Instead of one person have sole responsibility for financing the small business, crowdfunding takes the idea of an entrepreneur approaching a ‘crowd’ of people, each one contributing a small amount to the funding target.
What is Kickstarter?
Originally set up in the United States, Kickstarter.com is the company responsible for making crowdfunding possible. It is essentially a crowdfunding platform where entrepreneurs detail heir business plan and financial backers pledge their support. Kickstarter launched in 2009 and has since funded over 43,000 creative projects with a total of more than 4.3 million investors.
How does Kickstarter work?
– The entrepreneur posts a description of their business project, with optional pitch video. List a set of rewards depending on pledge levels. Finally, set a funding goal and time frame.
– Staff at Kickstarter look over the proposed project and give feedback – they decide whether or not to approve the project, which is then posted on site.
– The business project goes live.
– If the funding goal isn’t reached within the time frame then nobody’s card is charged and the entrepreneur receives no funding.
Pros and cons of Kickstarter
As with any company, there are the inevitable pros and cons. Let’s take a closer look at the pros and cons of Kickstarter.
Pros
– Project filtering: as each posting needs to be reviewed and approved first by the Kickstarter staff, this ensures that high quality projects are posted on to the platform. Financial backers aware of Kickstarter will understand that if your project has been approved, it must be good, and are therefore more likely to provide financial support.
– Rule conforming: all Kickstarter projects follow the same admissions process, urging the entrepreneur to have to work hard at fundraising, networking and publicising the business venture. These are all skills you’ll need as a business owner so you could argue that Kickstarter helps to reinforce these attributes.
– All or nothing approach: the fact that the entrepreneur receives no money if the funding target is not met is a great idea. This way, backers are less conscious that their money could simply end up going to Kickstarter should everything go pear shaped. Instead, it may make people more likely to want to invest in your cause, as they can rest assured that their cards will not be charged if the target is not achieved within the time frame.
Cons
– Hidden costs: if you’re going to be using the Kickstart platform to drum up financial backing for your business, you need to be aware that the company will take a five per cent cut of your received business pledges and that Amazon will take an additional sum on top of that. Before posting your business venture on such a platform, you’ll need to consider whether you feel the service you’ll be getting from Kickstarter is worth the money.
– Offline funding is difficult: if you’re looking to get financial backing by using Kickstarter, you should also realise that it will be very difficult to take that fundraising to an offline level. Unless you can find someone trustworthy enough to agree to pledge the funds you’ve raised offline, it’s likely that it won’t come to anything as it’s against the rules to pledge towards your own project.
As you can see, it really comes down to preferential choice. If you’re determined to start up your own business and the only way you can get the financial support needed is from crowdfunding, then Kickstarter is definitely worth a look. You can’t argue with their fantastic results after all.
About The Author
This blog post was contributed by Carl Smith on behalf of Parcel2Go. They offer a range of services for residents both in the USA and UK, with partners such as FedEx, TNT, City Link plus more. Visit their website today to find out more about Parcel2Go.com same day delivery and what they could do for you.