Why Opt for Crowdfunding : Part I

When it comes to getting money, there’s no one more eager than a business owner. Be it for starting-up or getting funding to push the business to the next level, businesses will opt for the easiest, fastest and cheapest way. Unfortunately, as we all know; money does not grow on trees.

The most common way for a business to do this, especially for startups is to proposition family members and friends for some form of business partnership. However, we all know that beseeching funds from family members could be the first or the last thing any business owner would want to do.

Approaching a bank seems like wise choice. After all, the impersonal engagement means the transaction (business seeking loan, banks seeking interests on loan) can be dealt with cold and impartial logic of finance. Banks don’t usually share a business’ vision nor the owner’s passion to make a difference. Businesses therefore are reduced to numbers dictated by the financial mantra of risks and returns.

Then comes every businesses’ lender of last resort, the anonymous loan sharks. As the daunting name suggests, loan sharks offer easy funding at an exorbitant interest rates. Not only that, they demand that loans be repaid within a short period of time. This could only mean that the business seeking the loan should make monumental returns or risk being crippled financially by the burdening interest (unsurprisingly loan sharks behave similarly with the named animal, employing various threat mechanism to ensure repayment). Surely a business desires NOT to be a shark’s meal.

So, is there any other option for businesses to acquire funds?

Well, there is. Enter… Crowdfunding.

With crowdfunding, it’s not just about the money. Through crowdfunding, not only could you have a more effective market validation (not limited to family and friends), but also a whole new way of accessing a wide range of investors, community exposure as well as real-time feedback. In addition to getting funds that could jump-start your business, it also offers real connection with people who care about your business; all at the tip of a click. In this article, we’re going to look into why businesses should opt for crowdfunding focusing around on the aspect of convenience, time and cost of raising funds. Also, follow us up on the next coming article, where we’ll also talk about how crowdfunding offers businesses the facility to promote their brand and the platform to raise market visibility.

 

CONVENIENCE : As Easy as 1,2,3 birds

 No one could argue that the internet and mobile technology is one of the biggest contributors to the ease of living in today’s modern age. Need a taxi? Grab it. Need a place to stay in a foreign place? Airbnb or Couch surf it. (these brand names are increasingly becoming verbs for all sorts of activities)

This is made possible because the internet content itself is beginning to be populated exclusively by user-generated content. This is no different for the case of crowdfunding. What you get is a revolutionized way for businesses to gain funds, match with investors and push their product forward to the market; dubbing it as the crowd-source fintech.

Drilling down on the detailed aspects of convenience; online crowdfunding offers a virtual platform for your businesses to pitch their ideas to multiple investors while simultaneously validating it openly with users across several social media platforms. The idea is that you could kill THREE birds with one stone.

Bird No 1 : There’s no need to go back and forth to banks or individual investors to secure deals and agreement since everything could be done online.

Bird No 2 : Businesses can also validate with the market immediately by having their deals scrutinized and accessible to the public.

Bird No 3 : Crowdfunding makes post funding reporting easy and manageable. Backers of your business or project will want to get live feed and updates online as your business progress. In addition to that, you could also interact with them in a closed-online-group forum making stakeholders communication less of a hassle.

 

FAST : Getting funds on quicker and on time

 “An ounce of gold will not buy an inch of time”, says an old Chinese proverb. The reverse is also true in that “an inch of time could loose you an ounce of gold’, as what any sane business owner would tell you. The business cycle in today’s market is getting shorter and disruptive filled with impatient consumers (or in other word, business opportunities).

It is important therefore that businesses could get funds quick and in a predictable manner so as to execute and manage the business plan. Businesses nowadays could not afford to sit still in waiting for funds to come, or worst, get loan applications rejected by the end of the day. It is best that information on fundraising activities could be tracked and could be listed with real hard target dates. This way, you as a business owner could plan for any eventuality and strategise for other methods of fundraising.

Crowdfunding not only features a set of clear fundraising timeframe, but also the ability to track funds as they are coming, in real time. Take for example; most equity crowdfunding platforms like ours clearly defines:

  • the timeframe for a business to get their deals listed on the platform (usually between 30 to 45 days)
  • The fund raising period of 90 days

Getting these sort of information is vital for your business to manage time on not be left out from the rat race!

 

CHEAP(ER) COST OF FUND : No surprises

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As mentioned earlier, time could cost money. Indeed, with a quick and efficient way of raising funds, the cost that comes with it too is low. To begin with, online crowdfunding platforms should ease the burden of paperwork, conducting meetings with potential backers and a plethora of all other hidden costs. Since everything is digitized, and made available both to the businesses and investors in real time, the true cost of the transaction is left only to two things:

Screening Cost(s) – It serves to ensure that deals getting listed have both credibility and quality, thus increasing the chance of a business to get funded. It also helps to build trust in the crowdfunding system

Success fees on funding – Legal, Marketing & Promotion, Investor Engagements

These costs are also predetermined and are open to all, so that business owners could gauge the true costs of raising funds through crowdfunding. What matters most to a business is that since the true cost of it is a fraction of the target funding amount that it wants to raise. Which in most of the cases, it is.

 To know more about how to raise funds through Equity Crowdfunding, go to              www.ata-plus.com.

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