The greatest challenge faced by most entrepreneurs is funding their start-up and growth. I faced tremendous challenges when I started my first 2 companies. For UTAC (which is a semiconductor technology and manufacturing company), I could not find any investors in Singapore and managed to get most of my funding from Taiwan. For Tri Star (an Electronics distribution business), I had to put my house up for mortgage. Since then (later 1990s) the environment has changed and entrepreneurs today have many alternative avenues of funding.
For today’s entrepreneurs, Crowdfunding may be a panacea to the problem that most entrepreneurs face by providing them with a viable source of funding. It is a very interesting development which is just a few years old but is taking the entrepreneurship world with a storm.
What is Crowfunding and what does Crowdfunding entail? The answer lies in the power of the masses and instead of approaching traditional investors, entrepreneurs can turn to the general public to pitch their idea and get them to contribute funds. Instead of taking more money from just a few investors, Crowdfunding allows a start-up to take small amounts of money from each of many more investors or customers.
With the advent of social media, Crowdfunding has reached unprecedented heights. Crowdfunding therefore not only helps to raise funds for a business but also raises awareness of the business, allowing entrepreneurs to highlight their ventures to the rest of the world. It in fact immediately generates a ready base of customers who are interested in your product of service. One clear advantage of Crowdfunding is that the ‘investors’ are less sophisticated compared to VCs and angel investors and therefore are easier to convince, therefore not taking too much of the entrepreneur’s time in fund raising. But one must also not underestimate the work needed to put up a compelling case that will attract ‘crowdfunders’ to invest.
While Crowdfunding is gaining popularity globally, USA still holds the lead in promulgating Crowdfunding. Their efforts to promote Crowdfunding should be lauded as it provides a lifeline to big and small businesses alike by providing them with sources of funding. Furthermore, Crowdfunding also allows the public to understand the purpose which underpins the business venture and in doing so, Crowdfunding enables entrepreneurs to seek a community of like-minded individuals and expand their customer base.
I believe there a few hundreds of platforms for Crowdfunding today and these will rapidly grow. What do you think about this avenue of raising funds and whether this will last long?