The crowdfunding industry is booming. Just a few weeks ago, the Humboldt Broncos group was able to raise over $15.2 million on GoFundMe for victims of a bus accident. And more recently, another group has already raised $231,707 of $350,000 for Hayleys Cancer Treatment. The list is endless.
The even greater news is that you now have a range of crowdfunding platforms to pick from. From pioneers such as Indiegogo to Kickstarter and now GoFundMe, you get to pick a platform that perfectly suits your needs.
Question is – why have these platforms become so popular all of a sudden? Why are startups overlooking venture capital and angle investors to instead raise funds through the likes of GoFundMe? Why are not-for-profit groups and organizations avoiding fundraising events in favor of online crowdfunding?
There are four main reasons:
- Organizers have access to a wider contributor base
First and foremost, online crowdfunding gives organizers a much wider reach than offline fundraisers. Consider the famous Humboldt bus accident mentioned above, for example. More than 50,000 people contributed toward the fund drive. And in the Hayleys cancer treatment campaign, 8,237 people have already contributed.
Compare that to offline fundraising events and you begin to see why crowdfunding initiatives are a lot more successful. Although the numbers vary, an offline fundraising event rarely attracts more than 100 people.
- Crowdfunding is cost effective
In an offline event, organizers must plan for a variety of items including seats, refreshments, t-shirts, banners, and so on. Charity walks, for instance, involve lengthy planning and widespread advertisements that could set back the event organizer hundreds if not thousands of dollars. Fundraiser dinners are even more expensive.
Online crowdfunding is a lot more cost effective. While you still need to spread the word to get as many participants as possible, you rarely need to spend thousands on ads. Google does most of the advertising, enabling the platforms to charge a marginal fee.
- Increased visibility of products a pull for startups
While this isn’t usually a primary reason for using crowdfunding platforms, it is definitely one of the ripple benefits that come with using these platforms, and one of the reasons the platforms are so popular.
Take an example of a startup looking to launch a new messaging tool. Most people will only get to know about the product after learning about the fund drive. If they decide to go with venture capital, they might get the money to launch, yes, but they may not get as much visibility. Since visibility is critical for product launches, crowdfunding makes the most sense.
- Real-time feedback another vital benefit
Finally, the likes of GoFundMe are also so successful because startup owners see the platforms as a way to get real-time feedback. Startups thrive on feedback. A successful product launch is shaped by the opinions of thousands. Offline fundraisers can provide feedback too, but crowdfunding platforms give you a lot more opinions that can be critical in launching a market-ready product.
If you haven’t used a crowdfunding before, take time to try out one soon. You’ll be astounded by the efficiency of these platforms.