Crowdfunding is not just for startups. Businesses can use it to grow and innovate, too.
Brad Damphousse, CEO of the online crowdfunding site GoFundMe.com, said this form of funding has become so popular because it has quickly proven itself to be an incredibly efficient and effective way of raising large amounts of money online from a host of different people.
"Passionate entrepreneurs are no longer limited by traditional gatekeepers, such as banks and investors," Damphousse told BusinessNewsDaily. "Instead, entrepreneurs are able to take their ideas directly to the market and gauge the response."
Recent research firm massolution revealed that crowdfunding platforms and websites raised $2.7 billion in 2012 — an 81 percent increase over 2011 — and successfully funded more than 1 million campaigns.
Damphousse offers business owners several tangible ways they can use crowdfunding to their advantage, including by:
- Increasing Sales: The biggest and perhaps most overlooked opportunity for businesses is leveraging crowdfunding to enable more consumers to afford a product or service. For example, GoFundMe's Partner Program includes businesses that refer potential customers to the site as a means of paying for a desired product.
- Launching a Business/Product/Project: A reward-based crowdfunding campaign allows the entrepreneur to incentivize supporters by offering a tangible item in return for a financial contribution. This approach is most often used in conjunction with an "all-or-nothing" crowdfunding model in which supporters' pledges are only charged if a campaigns reaches a specific funding goal by a set deadline.
- Growing a Business: Business owners are only limited by their own creativity when it comes to using crowdfunding to grow their business. Not only will a crowdfunding campaign bring in additional revenue, but the social media sharing aspect of crowdfunding can help spread the word about your business.
Launched in 2010, GoFundMe specializes in helping people raise money for personal causes and life events. Last month alone, the site helped raise nearly $8 million for campaigns funding a wide variety of causes, including cancer treatment, college tuition, service trips, adoption and family reunions.