Crowdfunding is far different from traditional business funding avenues. It is unconventional, fun and fuelled by passionate people. For many years, small businesses and entrepreneurs have faced great odds, with difficulty in both acquiring capital and an audience for their business idea. Crowdfunding is able to offer individuals a chance at success by addressing both of those pitfalls.
For the past couple of decades, venture capitalists and banks have had the advantage of holding the most power in the start-up ecosystem. However, many entrepreneurs have started to look for alternative, less rigid and cheaper methods to finance their small business. Crowdfunding plays a vital role in shifting the power from the institutional venture capitalist to the entrepreneur. It places the power to finance in the hands of the small business and allows for a more flexible and efficient approach to finance.
Crowdfunding platforms are becoming significant to the small business environment. They disrupt the traditional way of funding and give entrepreneurs the ability to seek capital without burdensome costs and regulatory controls. Whilst crowdfunding can fuel the start-up capital space, it can also provide a vast opportunity to established companies looking to expand or introduce their idea to the public.
The nature of crowdfunding also has a great social aspect, which traditional financing avenues lack. As a small business, crowdfunding is able to provide you with exposure to the mass audience and an ability to showcase your business idea to the world. By presenting their business ideas to the audience, entrepreneurs are able to validate their concept through the wisdom of the market. Crowdfunding has proven to be a powerful asset in growing an audience and sourcing potential customers. It is able to expose entrepreneurs to investors who are truly interested in their business.
Opposed to traditional financing channels, crowdfunding focuses on what makes your business unique, and the people and story behind your business. It allows, entrepreneurs, to control their communication with the audience, provide them with information and allow them to become a part of their business and your story. By both enabling and prompting entrepreneurs to utilise the online crowdfunding platform and social media as a powerful marketing tool, crowdfunding provides start-ups with much needed traction to succeed.
By placing the entrepreneur at the centre of the process, crowdfunding succeeds at filling in the gaps in the traditional financing space. The growth of crowdfunding platforms in New Zealand will flood the start-up market with capital and will be the catalyst for growth and development within the small-medium business sector and the economy as a whole.