Crowdfunding is becoming one of the great alternatives to a traditional bank loan or government grant. When you’re trying to raise awareness or start an advocacy campaign, gathering donations from a number of interested people is far preferable to borrowing money from an impersonal organization that you’ll probably have to pay back with interest.
Particularly in the case where the amount of money you need to get started isn’t terribly large, crowdfunding can be a great way to raise those funds, while at the same time avoiding debt and generating public awareness about your project.
In fact, the benefits reach far beyond convenience and simplicity.
Crowdfunding can benefit you in additional ways, by providing a form of marketing, public outreach and connecting people with your campaign on a personal basis. This, in turn, makes them feel like they’re a part of what you’re doing.
So, instead of raising the money yourself, you develop an enthusiastic following of people who have a stake in what you’re trying to accomplish and who support your cause.
Here’s how the plus-side unfolds:
1. Capital — One of the most basic benefits of crowdfunding is that it allows you to raise capital without having to give up any equity. This is great for non-profit groups or advocacy campaigns, whose projects usually don’t revolve around making money.
2. Risk reduction — When you take on a loan or even a government grant, there is a fair amount of risk involved. Crowdfunding allows you to bypass that risk by working completely from donations.
3. Bypassing a loan — As we’ve mentioned, one of the most common ways by which entrepreneurs fund projects is through some kind of bank loan. Since loans can often lead to debt and interest payments, bypassing them is a more favorable option that crowdfunding makes possible.
4. Marketing Mechanism — In and of itself, crowdfunding is a form of marketing. Since so many people are being made aware of your project from the beginning, interest and awareness is generated almost immediately.
5. Draws in Potential Long-Term Supporters — When that early awareness is raised, those who connect with your campaign early on could potentially become long-term supporters, or even members of your organization and project. People won’t donate unless they care about what you’re doing, so you can view each donation as a potentially valuable networking opportunity.
6. Third party portal options — The internet, being the primary vehicle for crowdfunding platforms, provides several third party portals that help you setup your campaign without having to worry about setting up your own to receive donations.
7. Free — Aside from a small percentage fee that third-party crowdfunding platforms might charge, setting up this type of project has little or no overhead, and is for practical purposes completely free.
8. Personal Connection — Perhaps even more valuable than all these things, is the personal connection that a crowdfunding campaign allows you to establish with people. As we’ve already pointed out, those who donate will be sympathetic to your cause and will be genuinely interested in what you’re doing; this can be a tremendous help as you move forward in your campaign.
A New Way to Fund a Project
Crowdfunding as an internet and social media phenomenon is still a relatively young concept; yet, in a tough economic climate, it’s catching on quickly.
For small projects and advocacy campaigns, it has definitely become the preferred method of funding, at least for the foreseeable future.