How Crowdfunding is Changing Entrepreneurship
The world of small and new businesses has been recently upgraded with business funding options by extremely active and forward-looking financial technology startups. The phenomena of those disruptors has been discussed over and over by tech experts, bankers and entrepreneurs.
It cannot go unnoticed that their advances in the financial sector are significantly changing what us, ordinary people, can do with our businesses. Suddenly, establishing a new venture or supporting an existing one is much more possible than it used to be. FinTech disruptors focus not on problems, but on solutions. Relying only on banks or government institutions might have caused dizziness and anxiety given their requirements for borrowing money.
However, besides regular money lending and borrowing, technology’s progression created something even more innovative and also rather unusual — crowdfunding. It is a practice of funding a project by raising funds through many small contributions from a large number of people, typically via the Internet.
The concept of crowdfunding has been mainly promoted by companies like Kickstarter, Indiegogo and GoFundMe. What distinguishes it from other business funding options is that, in most cases, it does not involve giving away equity. Rather, it is based on a reward system. The idea behind Kickstarter, for instance, is to allow people to support various concepts and ideas.
However, knowing how we humans are, we also want to get something in return. Kickstarter came up with the idea of rewards, which involves a copy of your work in different formats.
So what is so inspiring about crowdfunding? The ideas, the missions.
Carcel, a Copenhagen-based fashion label, manufactured by women in prison reached its initial funding goal in one day, surpassing it by 200,000 DKK. The idea behind the company is based on simple premises. It revolves around combining resources in a smart and efficient way, and at the same time making an impact and helping others.
The founder of the label cooperates with imprisoned Peruvian women who are sewing clothes made of 100% Baby Alpaca. As the women were already sewing clothes in the prison without any access to a market, the founder wanted to turn their wasted time into skills and paid jobs so women in prison could support themselves and their families. The next collection planned is to be made from 100% organic silk, manufactured in prisons in India.
Other projects raising humongous capital through crowdfunding did actually provide more basic products, or missions that were more low-key in comparison to Carcel. Nothing exquisite, though something we all need in our everyday lives – card games and showerheads. We all know the USA to be an entrepreneurial hub; thus no wonder one of the biggest pledges just happened there.
The card game Exploding Kittens was backed by 219,382 bankers pledging, wait for it… $8,782,571. Yes, you read that correctly.
The next famous story involves a showerhead. Nebia Shower got backed with $3,126,114 to introduce its water saving showerhead that is incredible in its design.
Frankly speaking, crowdfunding platforms are a perfect foundation for promoting your projects. It mostly depends on how you go about it, and how much time you invest in the promotion. Given how quickly different stories go viral, in a matter of hours or days, signing up your project should be supported by careful planning and execution of your idea.
Either way, crowdfunding supports entrepreneurship by opening the doors of possibilities for people with innovative ideas. Given the difficulty entrepreneurs are facing with setting up their businesses, crowdfunding is one of the options that contributes to sustaining a healthy economy. It simply does it through giving people the access and opportunity to contribute.
To learn more about Startup Digest, visit us and get in touch.