Developing new products can be costly. Finance is often required to carry out further product development work, or to assist with the purchase of mass production tooling. Crowdfunding is cost effective way of financing new product development whilst also boosting awareness of your project.
Crowdfunding provides entrepreneurs an online platform to present their product pitch to thousands of potential investors at once. Using a crowdfunding approach for funding it’s much easier to present your product to more interested parties and give them more ways to help grow your business, from investing thousands in exchange for equity to contributing £20 in exchange for a first-run product or other reward.
BENEFITS OF CROWDFUNDING
From tapping into a wider investor pool to enjoying more flexible fundraising options, there are a number of benefits to crowdfunding over traditional methods.
A single campaign allows you to reach thousands of potential investors quickly and efficiently who can see, interact with, and share your fundraising campaign.
Creating a crowdfunding campaign allows you to evaluate your business offering and distil it into an easily digestible package for potential customers.
PR & MARKETING
Quickly and easily share and promote your campaign through social media, email newsletters, and other online marketing tactics and media outlets.
Presenting your concept to the masses provides a great opportunity to validate and refine your product, making potential customers more likely to invest.
TYPES OF CROWDFUNDING
There are various types of crowdfunding schemes, however the most commonly used in new product development are Rewards Based Crowdfunding and Equity Based Crowdfunding. The requirements for each are similar.
Rewards-based crowdfunding allows people to contribute to your business in exchange for a “reward,” typically a form of the product your company offers. There is no financial or equity return.
Some useful links to crowdfunding websites can be found below:
UK Crowdfunding: www.ukcfa.org.uk
Equity-based crowdfunding allows contributors to become part-owners of your company by trading capital for equity shares. As equity owners, your contributors receive a financial return on their investment and ultimately receive a share of the profits in the form of a dividend or distribution.
Some useful links to equity based crowdfunding websites can be found below:
WHAT IS REQUIRED FOR A CROWDFUNDING CAMPAIGN?
A typical crowdfunding campaign takes the form of a presentation that explains the product or idea. There are some key product development stages that you'll need to have undertaken before you set up a crowdfunding campaign.
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