Is Crowd Fundraising The Next Big Thing in Business Funding?

If you have a great business idea that you are sure is going to be a success, sometimes the only thing that is standing in your way is the investment you need to get your business off the ground. Traditionally, this may have meant applying for a business loan at a bank, but this is a route that not all business owners want to go down, especially if it may be some time after the business has been established before you start to see the profits coming in.

Crowdfunding is an investment route that many people are now going down in order to get their business off the ground. Fundraising sites such as Kickstarter and Indiegogo allow people to invest in your business for a share in the profits when your business starts to make money. There are many advantages that using these sites have to help you make a success of your new business.

The main advantage is that it opens up avenues for funding that you might not otherwise have access to. Anyone in the world can invest in your business, and there will be not be the same restrictions that you face if you had a loan from the bank. You can set the terms of repayment for any investment that is made, and this may be a share of any future profits, or exclusive access to the first products that are made by your business.

When you are advertising for funding on a crowdfunding site, you also have the opportunity to make connections with people that are already in the industry that you hope to be working in. They may be able to offer you advice and guidance even if they are not in a position to make an investment. These connections can prove invaluable when your business is up and running, and they may help you get your foot in the door with other companies that you want to work alongside.

In order to gain the funding that you are after, you will need to be able to convince potential investors why this should risk their money in your business. It is essential that you have a business plan in place, and that you are able to answer questions that potential investors have about this plan. It is especially important that all the financial details are in place and have been checked thoroughly. Investors will want to see how much money you will need to get your business started, as well as detailed projections of the profits that you expect to make in the first few months, and any ongoing expenses that will need to be paid for.

 

[Dhruv Bindhani]

If you have a great business idea that you are sure is going to be a success, sometimes the only thing that is standing in your way is the investment you need to get your business off the ground. Traditionally, this may have meant applying for a business loan at a bank, but this is a route that not all business owners want to go down, especially if it may be some time after the business has been established before you start to see the profits coming in.

Crowdfunding is an investment route that many people are now going down in order to get their business off the ground. Fundraising sites such as Kickstarter and Indiegogo allow people to invest in your business for a share in the profits when your business starts to make money. There are many advantages that using these sites have to help you make a success of your new business.

The main advantage is that it opens up avenues for funding that you might not otherwise have access to. Anyone in the world can invest in your business, and there will be not be the same restrictions that you face if you had a loan from the bank. You can set the terms of repayment for any investment that is made, and this may be a share of any future profits, or exclusive access to the first products that are made by your business.

When you are advertising for funding on a crowdfunding site, you also have the opportunity to make connections with people that are already in the industry that you hope to be working in. They may be able to offer you advice and guidance even if they are not in a position to make an investment. These connections can prove invaluable when your business is up and running, and they may help you get your foot in the door with other companies that you want to work alongside.

In order to gain the funding that you are after, you will need to be able to convince potential investors why this should risk their money in your business. It is essential that you have a business plan in place, and that you are able to answer questions that potential investors have about this plan. It is especially important that all the financial details are in place and have been checked thoroughly. Investors will want to see how much money you will need to get your business started, as well as detailed projections of the profits that you expect to make in the first few months, and any ongoing expenses that will need to be paid for.

The article from September 2016 accurately describes crowdfunding as a popular alternative to traditional bank loans for business owners seeking investment. It highlights several key advantages and essential preparation steps for a successful crowdfunding campaign.

Here's a breakdown of the article's points, along with contemporary insights (as of June 2025):

Crowdfunding as an Investment Route:

• Alternative to Bank Loans: The article correctly positions crowdfunding as a viable option for entrepreneurs who may not want to pursue traditional bank loans, especially due to profit timelines or stringent restrictions. This remains a core appeal of crowdfunding.
• Platforms: Sites like Kickstarter and Indiegogo are mentioned as prominent examples, allowing individuals to invest in a business in exchange for a share in future profits or other benefits. These platforms are still dominant, though the landscape of crowdfunding has diversified to include more equity-based and lending-based platforms beyond just rewards.

Main Advantages of Crowdfunding (as described in the article, and still relevant):

1. Expanded Funding Avenues:
   
   • Global Reach: Crowdfunding opens up investment opportunities from anyone in the world, breaking geographical barriers that might limit traditional funding.
   • Fewer Restrictions: Entrepreneurs face fewer of the rigid restrictions often associated with bank loans.
   • Flexible Terms: Business owners can set their own terms for investment, which might include profit-sharing, exclusive early access to products, or other unique rewards. This flexibility is a significant draw.
2. Networking and Industry Connections:
   
   • Invaluable Connections: Advertising for funding on a crowdfunding site provides a platform to connect with industry experts, potential mentors, and even future collaborators. Even if they don't invest financially, their advice and guidance can be extremely valuable.
   • Foot in the Door: These connections can help a new business gain credibility and access to other companies within the industry.

Essential Steps for Gaining Funding:

1. Convince Potential Investors:
   
   • Risk Mitigation: Entrepreneurs must clearly articulate why potential investors should risk their money in the business.
   • Comprehensive Business Plan: A well-structured business plan is absolutely essential. This document should detail the business model, market analysis, marketing strategy, team, and operational plan.
   • Anticipate Questions: Be prepared to answer any questions investors may have about the business plan.
2. Thorough Financial Details:
   
   • Clear Financial Projections: It is crucial to have all financial details meticulously prepared and thoroughly checked.
   • Funding Needs: Clearly state the exact amount of money needed to launch the business.
   • Profit Projections: Provide detailed and realistic projections of expected profits for the initial months and beyond.
   • Ongoing Expenses: Clearly outline all ongoing operational expenses. Investors need to see a clear path to profitability and financial sustainability.

Contemporary Insights (June 2025 additions to the article's points):

• Types of Crowdfunding: The article primarily alludes to reward-based crowdfunding (like Kickstarter and Indiegogo often facilitate). However, other major types have matured significantly:
  
  • Equity Crowdfunding: Investors receive shares/equity in the company. This is regulated and allows for larger capital raises but dilutes ownership.
  • Debt Crowdfunding (P2P Lending): Investors lend money in exchange for interest payments.
  • Donation Crowdfunding: Funds are given purely out of goodwill, without expectation of financial return (e.g., for charity or personal causes).
• Market Validation: A major benefit often cited today is market validation. A successful crowdfunding campaign proves there's demand for the product/service before full-scale production. This can be a powerful signal to traditional investors.
• Marketing and Buzz: Crowdfunding campaigns serve as powerful marketing tools, generating buzz, media attention, and an initial customer base even before launch.
• Community Building: Campaigns foster a community of early adopters and brand advocates who are emotionally invested in the project's success.
• Risks: While the article highlights advantages, it's important to note the risks:
  
  • Failure to Fund: Many campaigns don't reach their goal.
  • Overpromising/Under-delivering: Failure to deliver on rewards or product promises can severely damage reputation.
  • Intellectual Property (IP) Risk: Publicly sharing an idea can expose it to copycats.
  • Campaign Management Effort: Running a successful campaign requires significant time, effort, and marketing.
  • Fees: Platforms charge fees on successful campaigns.

In conclusion, the 2016 article provides a solid foundation for understanding crowdfunding's benefits and requirements. While the core principles remain, the sophistication and diversification of crowdfunding models and the competitive landscape have evolved, making thorough preparation and understanding of the specific platform and crowdfunding type even more critical in 2025.

 

[Simran Rai]

This article presents a compelling case for crowdfunding as a modern alternative to traditional bank loans, especially for aspiring entrepreneurs who may not yet have cash flow or collateral. Platforms like Kickstarter and Indiegogo do more than just provide capital—they also offer visibility, community validation, and networking opportunities. One key advantage is flexibility: business owners can define the rewards or returns they offer to backers, making funding terms more manageable and aligned with long-term goals. Additionally, crowdfunding serves as an early litmus test—if people are willing to invest, it suggests market interest in the idea. However, the piece wisely emphasizes the importance of preparation. Without a solid business plan, realistic projections, and an ability to address tough investor questions, even the best ideas may fail to secure backing.​