Crowdfunding appears to be the next option for entrepreneurs, as an alternative means of funding their new venture.

Some, may not, even, look the way of angel investors, while exploring available options, however, it will be great if you do not limit your options.

A quick reminder, angel investors are individuals, with a high net worth, who gives funding, to entrepreneurs and start-ups, to have equity in your company.

Crowdfunding, however, involves the practice of accessing funds for projects, through the raising of small amounts of money, from a very large number of people, through the internet.

The contributors, in this case, must be willing, to let go, of any form of equity, from the company.

As a mentor to a number of start-ups and entrepreneurs alike, I have come up with some key factors that, you need to consider, when exploring sources of funds, for your business. These factors are stated below:

B2B Products Need Professional Investors

Who is your target customer? A business, or, a consumer? A crowdfunding method, may not work, if your product, or, service is, for consumers.

Angel investors, who want a piece of your company are, fully, into business and they have what it takes, to relate with other businesses.

Investors would expect to see a working business model of your start-up, with a workable prototype.

Forget about research and development on your early-stage, as investors are not moved, by them. Bottom line is that crowdfunding is, not a viable alternative, for a B2B model.

A Need For Multiple Rounds Of Funding

In expanding a business, most start-ups, invariably, require more money, than they anticipated.

Investors are aware, of this and they are, often prepared, to give the required assistance.

The support may, however, not come, when the first round of your capital is, from a crowdfunding platform, as investors are very cautious of unverified valuation and owners.

For instance, Facebook, had to go through multiple rounds of investment, before it reached profitability and current valuation.

Consumer Products Require Market Validation

You will get a good validation of a huge market, plus more funding. The problem with crowdfunding, sometimes is that, if you fail to reach your monetary target, you may end up returning the ones you have collected.

Early Visibility May Be A Curse Or A Blessing

Sometimes, you might want to slow down a bit, if it appears that, you find yourself, in a, highly, competitive environment.

Investors are, most interested, in doing a nondisclosure investment. If it were crowdfunding, you will be forced to make some public marketing, hence, giving your start-up an early exposure, which may not be favorable.

On the flip side, marketing early could shoot up your brand, while leveraging the crowdfunding platform, to give a quick word, spread about your business.

Having your funding campaign kicking off, on a good note, shows your potential customers that, your business is worth trying out.

Compare Time Frames And Costs

Most times, a campaign, run through crowdfunding, can be executed, even, within the development cycle, faster than, the one from investors.

Do not, also, forget that, there is, a downside to this too. A campaigning, on crowdfunding, comes with fees, which might cost you, more than, even, getting an investor.

In my opinion, a successful funding campaign, often comes, from self-funding. I have seen, so many businesses, kicked off and succeeded, through bootstrapping.

Smart entrepreneurs, carefully, evaluate their alternatives and make the best, out of their choice.


Featured Image: invoice.ng