Why is Crowdfunding Important for Startups?

Whether coming up with a new product or a new initiative, Crowdfunding is the key mantra to gauge eyeballs and generate awareness about the product or the initiative. Also, crowdfunding campaigns have three major uses which are: -

(I) Product Validation: - Couple of questions that crop up while preparing to launch a start-up are: “If I built it, will people buy it?”, here crowdfunding becomes one of the most important ways of answering these questions. With a successful crowd-funding campaign, not only one gets money to get off the ground, but also establish customer base, which further suggests that there will be plenty of other customers out there as one broadens its reach.

(II) Bypassing the Traditional Gatekeepers:- Venture capitalists make a living out of determining which companies have a good shot at success and which ones are not likely to go anywhere. However, more often than not, they get it wrong, considering that the vast majority of venture-capital-backed start-ups fail. And it can also go the other way-just because one wasn't able to convince a few individuals of your viability doesn't mean one’s business isn't a potentially good one. And if one can pull off a successful crowd funding campaign, even the venture capitalists that turned down might be willing to take a second look.

(III) Marketing Blitz:- A Good Crowdfunding platform give high-stakes time frames to meet a specific fundraising goal. Which can be used in going out loud in the market, establishing contacts, refining presentations, honing message, hammering down costing details and all other stuff that one should be doing to gauge enough eyeballs.

On the other hand, one must make sure everything is in place before one starts his/her campaign, because a poorly-executed attempt to crowd-fund can leave him/her with "what if" regrets and your product in a worse position than it was before.