The world is changing and it’s changing fast. Increasingly, there are instances where people as young as 18 are becoming entrepreneurs and are starting their own business empires. “I started my company by maxing out my credit cards,” this is one statement that you hear a lot nowadays. But you don’t have to ruin your credit report to start your own business, all thanks to crowdfunding.
The concept that has been present in the world for centuries has stormed onto the global economic and business world and is being talked about and perceived as a new industry.
By definition, the term crowdfunding represents rising of finances for a particular product or venture with the help of small investments from a large number of people. What makes it a new phenomenon of sorts is that this process is being carried out through the internet.
Such has been the rise of crowdfunding that it has grown from being regarded as a digital quirk to a much more powerful tool that is almost equivalent to an online business bank.
Crowd Funding as the Savior
It is almost common to come across stories where the use of crowdfunding helped a bright business idea with little or no formal investment backing from falling by the way side. Crowdfunding is often hailed as the darling of the artists where creative personalities, popular over the world have tried to tap into the essence and benefits of crowdfunding so have other bright-idea-laden entrepreneurs.
The fact that crowdfunding is different from the use of banks or venture capitals and is dependent on the funding of the ordinary bank makes it a more feasible option for businesses. The potential of crowdfunding has been tapped into by a number of different businesses. Since its coming of age at the global business scene, billions of dollars have flown in to new ventures by way of crowdfunding.
Such has been the affect of the global funding curve that it is often referred to as a global phenomenon and a revolution in the making. As far as facts go, the use of crowdfunding is not limited to artists and creative personalities. Back in 2012, a research firm estimated that the market of crowd funding was nearly $3 billion. In the year 2013, the same firm believed that the year 2013 would see the market rise to a mammoth $5.1 billion. In 2016, crowdfunding passed VC funding through equity raised, and, by 2025, the report published by World Bank estimates that the global investment will reach $93 billion through crowdfunding.
A Bank for the Future
The process of taking money from the bank or going after lenders to ensure that your business start up idea or your flagging business proposition is injected with much needed cash is important. The process of taking money in that regard is typically both slow and arduous. A bank and a lender will typically need more than a simple business idea or a business plan to back your idea. They will want to see the entrepreneur’s credit history and the financial collateral that they are given in return for the loan.
Crowd funding on the other hand has revolutionized the concept of traditional lending of money. The fact that there is money available in small amounts from a large number of people has meant that there is a greater chance that business ideas and entrepreneur confidence will be backed up with the requisite finances to go ahead. The use of crowd funding has been one of the main reasons in the increase of entrepreneurial activities and business emerging in the last decade or so with even 18 year old young teens stepping into the world of business.
The use of crowd funding in this regard has allowed the bypassing of traditional routes of business financing such as angel networks, banks and venture capital firms.
Giving a Greater Business Share to Women
According to an investigation led by the US Senate’s Committee on Entrepreneurship and Small businesses found that women run business received the least amount of loans as compared to men. As a matter of fact, a research conducted by the Babson University shows that only 2.7 percent of the small business that got loans between 2011 and 2013 were owned by women, the rest were owned by men. In 2017, things are no better. Women still get approved at a lower rate than men for debt funding.
These statistics provided above and illustrated chart below highlight the troubles that women face in the world of business globally and in the US. This is largely down to the lack of finances. However role if crowd funding is changing that.
Women entrepreneurs are now starting to find solace in the crowd funding. The process of crowd funding is more democratic, which means that most men and women have an equal opportunity to getting finances for their respective business activities. Not only are women making use of loans received by the crowd funding.
According to the statistics produced by the Angel Capital Association a significant number of investors in crowd funding applications are related to women. For example 28 percent of investor attendees in the angel investment associations are women.
The use of crowd on the whole has gone onto increase the number of business enterprises on the whole. The fact that a large number of people can contribute little individual amounts and yet create a considerable overall amount to give a business a monetary boost ensures that neither investment party is taking a higher risk than it should. The fact that this crowd funding technique is different to orthodox lending mechanisms has gone a long way to changing the global way business were done.
There is no longer a need to have the best credit history or a considerably well planned, thought out business proposal that has little chances of failing. Any idea that you have a truly believe in can be acceptable for the start of your business as long as you are able to raise sufficient crowd funding via the internet for your cause.