As many would-be entrepreneurs return to work after the Christmas and New Year break thoughts of starting a new business begin to crystallise. Once the idea is formed and the plan is written the problem of funding comes to the fore.
Worryingly, almost half of the respondents to a recent survey (45 per cent) said they would not know where to turn for funding support to start or grow a business. The same survey found that traditional sources of funding for small businesses remain favourite. Personal savings came out top (35 per cent), followed by banks and institutions (28 per cent) and friends and family (15 per cent).
Only eight per cent of respondents said that they would consider crowdfunding when seeking finance to start or scale a business. The crowdfunding market is yet to capture the imagination of the UK’s small business community. There is clearly a need to do more in raising awareness and education among Britain’s entrepreneurs.
Crowdfunding is an alternative method of raising finance for a business objective. It is unlike traditional angel investment, in which just a few people typically take a large share in a business. With crowdfunding an entrepreneur can attract a ‘crowd’ of people who may not have invested in shares before, each of whom takes a small stake in a business idea by contributing towards an online funding target.
The main benefit of crowdfunding, other than raising much needed capital, is that it creates a strong network of support for your company. The equity model is especially good at creating ambassadors for your brand, promoting it amongst their networks, family and friends and often becoming returning customers themselves.
Crowdfunding is still only a small part of the fundraising scene in the UK but it is growing fast. If you need funding then it is certainly worth looking into crowdfunding.