The security of a 9 to 5 job has been overpowered by the thrill of creating something of your own. In recent times, most people aspire to become entrepreneurs. The ‘Startup India’ initiative launched by the Government of India has further given this transition a positive boost.
Young India dreams of changing the world with their exotic ideas. But the success of these ideas largely depends on sufficient financial funding. The journey of securing enough funds for one’s venture is a crucial part of an entrepreneur’s personal and professional growth.
Basic fund raising tools
Some of the most common ways of raising money for a start-up is approaching angel investors, venture capitalists, loans or seeking co-founders and family and friends willing to back you up.
The advantage of associating with an angel investor or a VC firm is that you get something more than just the money. You get value addition in terms of industry experience, deeper insight into the market, and relevant resources. On the downside, two deals on the surface could be six deals behind the scenes. An investor may also back out last minute, making the whole process a complete waste of time and effort.
On the other hand, your friends and family serving as financial backers will support you a hundred per cent, but may lack professional expertise and understanding of your business.
Working with co-founders during the initial stages has equal advantages and risks. Every founder brings different ideas and perspective to the table. The pressure of making decisions and taking risks is divided amongst various people, instead of just one person. But as the popular adage goes, too many cooks spoil the broth. Chances of conflict and dispute increase, which eventually affects the business.
Crowdfunding – the least explored avenue in India
The Indian entrepreneurial community has traditionally been focused on bank loans, corporate investment and family as a source of funding. Crowdfunding portals are still considered as a western phenomenon in our country, allowing little scope for such reward-based modules to flourish.
The idea of having complete strangers invest in your business may sound a bit ridiculous and dubious at first, but it has a number of advantages.
Advantages of Crowdfunding
Crowdfunding allows entrepreneurs to accumulate small sums of funding from a large number of funders online in a fast and efficient way; no need to give up equity (in some cases), take on a huge debt, or worry about making endless pitches.
Crowdfunding also gives entrepreneurs the opportunity to test out the market and gauge audience reaction before actually launching the product. Timelines to go live can be relatively flexible and altered as per convenience.
It also gives an entrepreneur access to a community of people who truly believe in the product and service. These people are also the early adopters and will give valuable feedback and inputs on areas for improvement.
Crowdfunding a venture successfully in its initial stages is also a way to validate that there is a need for the product to exist and build credibility in the market.
Who can opt for Crowdfunding?
While crowdfunding is mainly used by entrepreneurs offering a new product or services but the platform may be used by artists, travellers, film makers, independent consultants, NGOs, and more.
Things to keep in mind
- The most important thing before you launch a crowdfunding campaign is to have a plan; logistics, patents & copyrights, and milestones mapped out. Don’t take a vague, uncertain idea to an audience. This creates a negative impression
- There are number of things vying for a person’s attention. So make sure your story and initial pitch is eye-catching and inspiring. A well-thought of campaign can also double as a PR and marketing activity to introduce the product into the consumer market and pre-sell it
- Make sure you highlight the benefits the funders will reap in their efforts to support you
- Just because you’re crowdfunding doesn’t mean you shouldn’t tap in to your pool of close friends and family member. Your success rate depends on the support you receive at the onset of the campaign
- Engage with the funders via chats and videos and be accessible
- Getting an influencer or celebrity to endorse your campaign works like a charm too
Crowd funding channels in India
Since crowd funding is a small space in India right now, there is a lack of highly credible and organised portals, as opposed to their western counterparts. However, some platforms like Ketto, Fundlined, Wishberry, Catapooolt and Indiegogo have displayed calibre and immense potential.
MD & CEO of Metropolis Healthcare
The views expressed by the author do not necessarily reflect the views and policies of the CSA BUSINESS. The article was first published on Linkedin.