The emerging trend of Entrepreneurship and the Government going more lenient with the entrepreneurial policies and rules, there has been a significant amount of increase in people adopting entrepreneurship. Be it the highly expertise professionals or the B-school students, each of them is eager to give up their otherwise relatively comfortable lives to embrace the Startup Culture.
From developing an idea to turning it into reality, an entrepreneur needs to inculcate various resources, the most important being Funds. We require funds at every stage of business for its appropriate functioning. To employ human resource, or to buy resources/raw materials and for day-to-day operations, every activity requires funds. Though there is a presence of the traditional channels like the VC’s and investors, yet these entrepreneurs face difficulty in raising funds due to the complexities and protocols involved. Some might fail to convey their idea to these investors while some find it grueling to come up with their expectations and many more. Then what do you think is the best alternative for these entrepreneurs? Crowdfunding, it is!
Crowdfunding is an age old concept, where a large number of people accumulate a few funds making it a huge amount. Heard about it for the first time? No doubt today’s crowdfunding is a niche concept for people because this accumulation of funds from a large number of people takes place over the Internet. But one of the most renowned business tycoons of our country Late Shri Dhirubhai Ambani also started his textile business with crowdfunding in India.
Even today’s entrepreneur finds crowdfunding a much better alternative to raising funds rather than traditional fundraising techniques. It provides a better opportunity to the entrepreneurs to appeal to the crowd directly about their project. Crowdfunding not only helps them to raise funds, but also it has various added advantages associated with the concept which makes it widely acceptable such as the crowd validates the idea as much before the actual implementation. Also, the entrepreneur can cut his marketing costs as while crowdfunding, there is a dire need to market your idea/project only then people will be able to know about the trending business idea and, therefore, this way the marketing is done without incurring any further costs.
More importantly, crowdfunding empowers the entrepreneur by giving them a platform where they could realize their actual number of followers and supporters. The concept has been further divided into two categories for entrepreneurs-
1. Equity-based Crowdfunding: Under this type of crowdfunding, the project owner gives the equity/shares of the company to his backers in return for their contribution. It allures more people to contribute as they become the shareholder of the company simply by contributing to the project.
2. Reward based Crowdfunding: Here the project owner offers captivating rewards to the backers which otherwise money can’t buy.
Categorizing crowdfunding into reward based and equity-based gives a wider perspective to the entrepreneur to choose whether he would like to share equity with his backers or would be offering perks. Conclusively, an entrepreneur finds crowdfunding more beneficial rather than just simply giving presentations in front of investors or accumulating guarantors for bank loans.