In crowdfunding, investors can get a chance to make money from startups and new entrepreneurs. However, before they dedicate money to investment crowdfunding, they need to know what benefits they can get. Benefits of crowdfunding for investors includes profitable investments, and broadened investment portfolios, etc...
Meanwhile, for startups, crowdfunding is becoming an increasingly popular way to raise funds. The only problem is that some people are not familiar with the benefits crowdfunding offers if they ever want to consider.
In this article, I will explain the essential benefits of crowdfunding for both investors and startups.
Benefits of crowdfunding for investors
Crowdfunding is an excellent place to start if you are interested in using your money, whether individually or for a retirement plan, but you don't have much capital to invest.
With greater advantages and lower costs, investors often look for opportunities. The crowdfunding sector's potential is immense, with several unique projects successfully ending with satisfying early investor returns.
Broadened investment portfolio
Experts suggest not giving all your crowdfunding funds to just one company. They advise on choosing multiple businesses to share your money between them. This is also known as portfolio diversification, and it comes as a rule of thumb. However, even in this situation, it is challenging to minimise the risk of losing your assets.
To minimise the risk of loss, research carefully the firms in which you are planning to invest. Carry out the due diligence (CDD) of your client, study a creditor's history, and evaluate the technological and financial sides of a proposal or plan.
Consider diverse crowdfunding trends to keep your portfolio safe and well-diversified. Each trend has its crowdfunding advantages for investors, and you can opt for crowdlending and equity investments. Study everything about the business model used as a crowdfunding services supplier and do not hesitate to ask questions.
An Easy Start
With easy crowdfunding channels for buyers, the whole transaction takes no time and needs little commitment. Having "the right connections" is also not necessary. All fundraising campaigns are open to the public and can be accessed with a few clicks. To showcase the idea and its capital needs, every company has a promo page.
Small investment opportunities
There are always opportunities for you to become a backer, no matter how much cash you have. Crowdfunding platforms set minimum limits open to almost all where thresholds differ according to a platform's business concept.
Crowdfunding investors benefit from lowering the tax burden. Supporters must obey the same guidelines for stock market transactions, as the regulatory framework in this field is still changing. After selling a share in a company, investors must report a profit or a loss they have received.
For example, since the benefit could be completely removed from the portfolio, small companies and individual investors could be allowed not to pay any investment capital gain taxes as the gain might be entirely excluded from the capital.
There may be extra benefits or a tax break for those who have reinvested their earnings in other companies. A tax break may also be offered for investors who have registered losses or stock owners who cost absolutely nothing. Instead, worthless assets may be taken into account as losses and deducted from ordinary profits.
Helping Hand for innovative startups
To get funding, existing brands use crowdfunding platforms as a source, as well as unknown startups. Brands are becoming more likely to get cash in more affordable ways. The crowdfunding community is also great for testing product ideas, planning pre-selling promotions, and collecting consumers' input.
Thus, there is an excellent opportunity to lend a helping hand to businesses that investors are fans of. Supporters get a chance to extend the network of connections in exchange for the help offered. With that in mind, crowdfunding's ideological element could be more important to investors than financial well-being alone.
The international group of like-minded individuals is another crowdfunding bonus. There are several places to inquire around for a crowdfunding newbie eager to know all the investment process's particulars. The digital domain is full of blogs, Q&A forums, and pages providing business investors with insight into crowdfunding. Many crowdfunding sites have platforms for investors to discuss pitches, post questions, exchange experiences and offer tips.
Benefits of crowdfunding for Startups
Protect From Risks
It's a risky and challenging trip to start up a company. In addition to seeking ample financing, there are often costs that are difficult to foresee, business validation problems and other individuals who want a piece of the company to help get it off the ground. Launching a crowdfunding campaign protects these risks and works as a valuable learning experience. As it is today, crowdfunding helps an entrepreneur to receive market approval and stop giving up equity before going all out and selling a product idea.
Provides access to funds
You might think that you can only raise capital early from accredited investors, venture capitalists, and banks outside their network. However, this is not true. Crowdfunding is an exciting alternative way to finance a company, and even without giving up equity or accumulating debt, it can be accomplished.
Serves as a marketing tool
For a small business, crowdfunding is a fantastic opportunity. Crowdfunding can be a way out for you if you are an owner of a small business company with a brilliant idea but lack of venture capital. You will share the concept with customers, and you would be able to raise funds to begin development if they like it.
Crowdfunding is a great marketing channel as first samples of goods can be awarded to your backers. You would not have intermediaries in this situation, except for the website for crowdfunding.
Therefore, if you want to launch something innovative, but still unsure if your idea is cool enough, you can try it with the crowdfunding group first, and you can start creating it in full swing if they like your idea.
Gain Early Adopter
The people who support the social evidence of your idea are your early adopters and potential brand advocates. They believe in your story, product, or service, enough to invest their money in its long-term success and longevity. These early adopters are key to your crowdfunding campaign's success, being the ones who most likely to share your vision and promote it through their social networks with friends and family.
Provides the chance of pre-selling
Launching a crowdfunding campaign helps you pre-sell an item or idea that is not yet out on the market. This is a perfect way to evaluate consumer reaction and examine the demand to determine if a given idea should be followed or declined.
Get feedback and expert guidance
Crowdsourcing allows brainstorming. One of the greatest obstacles for small businesses and startups is bridging all the holes that a business might have at an early stage. You can engage with the community and gather comments, reviews, and ideas by having a crowdfunding campaign. This feedback is essential, as it can help identify certain facets of their previously unthought and unheard of their organisation.
You will share your product and business model with the very individuals you are trying to sell to when you start a crowdfunding campaign, and it gives you an important opportunity for input. Early contributors could point out flaws in your idea that they would like to see addressed, or come up with fresh feature ideas that can further enhance your model.
If you are looking for funding for your business, Trendscout is an excellent platform for crowdfunding that can support you.
Trendscout is a forum that links angel investors and entrepreneurs and is based in the heart of London, specialising in the creation of purposeful, considered partnerships that drive profit and growth.
Every year, hundreds of startups are evaluated by our team of experts. We analyse every company we work with their potential, mission and ethical principles, ensuring that every startup we serve aligns with our values.
Our network of innovative startups and creators, with over 30 years of industry and experience, allows us to spot up-and-coming prospects before they reach the masses. If you're interested in investing in crowdfunding, consider making an appointment with us today. Rest assured that you will be supported every step of the way.