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3 Reasons Why Crowdfunding Works

Zach Braff may be in the hot seat for utilizing crowdfunding website Kickstarter to raise money for his newest film project, but at least the recent controversy has also shed a brighter, positive light on this peer-to-peer donation craze that seeks to launch projects by unknown filmmakers, musicians, tech companies and startup entrepreneurs who otherwise might not be able to get the funding they need.

If you're thinking about turning to venture capitalists or small business loans to fund your startup idea, you shouldn't shy away from first looking into this booming $4 billion market. If that statistic alone doesn't convince you, here are three more reasons why your startup should launch a crowdfunding campaign. 



 1.) You'll Build Brand Advocates Before You Even Launch 

Crowdfunding isn't always about money. It's about surrounding your startup with people who also love what you're about to produce. If you use the crowdfunding ecosystem in the correct, most effective manner, you'll create a big, positive buzz about your new product before it officially launches. Remember: Consumers who back your crowdfunding campaign are already your biggest brand advocates, who might turn into life-long fans; spreading the good word about your awesome product before โ€“ and after โ€“ you launch. 

 2.) You Won't Have to Deal with Unneeded Distractions 

Here's an understatement if you've ever heard one: Working on a startup is hard work. This is just one reason why many people decide to follow a more traditional, cushy career path. Startup entrepreneurship can be physically draining due to lack of sleep and financial frustrations, plus it can take a toll on your emotional health. When your startup seeks venture capital, closed door after closed door can cause blows to your ego โ€“ and your heart if your product is your passion (and it should be). And though using crowdfunding websites isn't ever a sure thing to get the money you need, this source of financing will give you some time back into your day to focus on building your new product instead of worrying too much about the financial backing process. The more relaxed you are, the less likely you'll be to quit. 

 3.) You'll Have Instant Feedback and Market Testing at Your Fingertip

Crowdfunding websites can help your startup instantly discover and define the exact needs of your target market. On Kickstarter, for example, backers of your campaign can leave comments and message you directly about their own ideas, resulting in help from those who matter most: consumers. It should go without saying that actively listening to your backers will make your product better before you release it to the world. And this pivot approach to entrepreneurship has helped successfully launch a slew of some now-big-name companies like YouTube, Twitter and Instagram. Newer startups like Pinterest marketing tool, Pingage, are also gaining traction and getting a lot of financial backing from using the pivot method, as well. Simply put: Crowdfunding makes pivoting easier, which will make your product launch bigger and better than you ever dreamed possible. 

Tell Us What You Think 

Will you be utilizing crowdfunding to help launch your startup idea? Why or why not? Tell us in the comments or on Twitter

More from PayScale 

Why It's Startup Time in America 

12 Tips for New Entrepreneurs Who Want to Try Crowfunding 

 (Photo Credit: albarber3/Flickr )

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