Crowdfunding: why is it important for a startup?
Crowdfunding is a valid tool for raising the necessary funds to finance a new business idea, a startup or a company when you do not have sufficient economic resources.
Crowdfunding is a reality that has taken hold for several years and is growing rapidly in Italy as well. This method of financing also makes it possible to accumulate sums of considerable importance, leveraging the participation of a ugenumber of people interested in supporting the realization of a specific project. We will see what it is, what the existing types are, and what are the advantages for a startup.
What is crowdfunding
The English expression crowdfunding is now part of the common language and represents an alternative method for raising funds online. Generally, the raising of capital is used to carry out projects (both profit and non-profit), to support charitable initiatives or to develop an innovative business idea.
The term crowdfunding is a compound word, originating from the combination of “crowd” or “crowd”, and “funding” which means “financing”. In essence, it is a form of collective financing and is also defined as bottom-up financing, as it mobilizes a group of subjects who choose to use their money to support and finance the efforts of people and organizations.
This collaborative process takes place through the use of web platforms, where supporters donate their money. In fact, among the main innovations brought about by crowdfunding are the completely revolutionary ways of using IT tools and the unexpected abilities of platforms to involve, even emotionally, a considerable number of individuals.
Worldwide, new crowdfunding initiatives are launched every day and the phenomenon is constantly growing in our country. To date, over 100 platforms have been surveyed in Italy that promote the projects to be financed and this number is constantly growing.
Crowdfunding for companies and startups
In Italy, as well as in the rest of the world, there are really many entrepreneurial projects born or developed thanks to this specific form of collective financing. Startups, in fact, can raise the necessary funds to start and support their innovative project through crowdfunding platforms.
This type of fundraising, in fact, can prove to be a valid opportunity for ambitious business projects with a strong innovative footprint: these, in fact, can leverage the emotional involvement and active participation of the community by exploiting the strong appeal exercised by the potential for growth and the impact on the market of the idea itself.
Usually, the most used form of crowdfunding for startups and SMEs is equity crowdfunding. This is a method that provides for the transfer of a part of the company shares to the supporters of who choose to donate money by investing in a specific project.
The types of crowdfunding
In addition to the aforementioned equity crowdfunding, there are different types that are distinguished from each other on the basis of the “reward” given to lenders in exchange for the money donated. Let’s see which only the main characteristics of each:
• EQUITY CROWDFOUNDING – This is to all intents and purposes a real form of investment since company shares are sold to the “donors”. The investor has the right to resell their shares at a later time (thus obtaining a profit) or run the risk of losing all the capital in case of failure of the project. Users, however, can count on the various protections guaranteed by current legislation and by Consob (National Commission for Companies and the Stock Exchange).
• DONATION CROWDFUNDING – For many it represents the “original” form of crowdfunding and identifies the typical model of donation, in which one’s money is selflessly donated to support a specific cause, without receiving any form of reward in exchange. These donations are usually related to charitable initiatives.
• REWARD CROWDFUNDING – Donors receive a reward proportionate to the capital invested in a different form and modality depending on the project.
• LENDING CROWDFUNDING – It is a form of loan provided by the supporters of the project. The company will have to provide for the return of the entire amount with the addition of a share of interest.
Why it matters and what are the benefits of crowdfunding?
This form of financing is undoubtedly a valid opportunity for innovative startups looking for capital to carry out their project. One of the most important advantages of crowdfunding is precisely the raising of capital: it is important to underline that many innovative and revolutionary projects of recent years could never have been carried out without funding from individuals who believed in and supported the initiative from the very beginning. initials.
Startups and crowdfunding form a much closer duo than one might think. In fact, many startuppers, having no solid credit history, cannot have access to more traditional bank loans.
Another advantage of collective financing, this time of an indirect type, is the possibility of testing the validity of one’s idea before even putting it on the market. Based on the interest and involvement aroused by the project, it will be possible to understand if the latter is destined to be successful in the short and medium term.
Finally, crowdfunding knows no borders: through platforms, projects are also promoted outside national borders. All this makes it possible to break down distances and reach investors in every part of the world.
How to create an effective campaign?
Collective financing can be a key tool for starting and developing a business idea, but it is necessary to play your cards right by launching a successful campaign.
Contrary to popular belief, this is not a mere collection on the web. It is therefore essential to carefully address each step and set specific objectives, such as the amount you want to collect and the duration of the campaign.
The raising of capital takes place almost exclusively online, so it is essential to have digital communication channels to make the project known and attract financiers. In this regard, it is appropriate to define a clear, modern and seductive digital identity, also developing a communication strategy for social media.
Proceeding with skill and method is important to increase the chances of success of the crowdfunding campaign. It is essential to analyze every aspect, from the reward to be offered to supporters to the different ways to involve them in the initiative, always bearing in mind that the most successful campaigns are those that prove to be able to satisfy concrete needs and to obtain a considerablenumber of supporters. both on and off the web.