Crowdfunding Your Business
As the name itself suggests, crowdfunding is a method of funding your business by using the capital offered to you by a large number of individuals. Practically, a crowd will put their money together and invest in your business.
Is Crowdfunding Successful?
If we are talking about the success rate of this innovative method, there are a few outstanding examples we should not omit. One of the most amazing is the case of Pebble E-Paper Watch. Only in 37 days, they have raised over $10 million, which is definitely a considerable amount of money for any business. Some people needed $8 million for charity purposes. They wanted to restore the International Chapel of Martin Luther King Jr in Atlanta, and they have raised more than $5 million only through crowdfunding. Another success was recorded by those from Ouya, as they have raised $8.5 million in only 29 days for their new open-source game console.
However, even though these examples show the success of some crowdfunding campaigns, there are also several strict regulations regarding this strategy in Australia. These are meant to protect the people that are not wealthy from investing too much in small businesses that may fail. Basically, these laws are intended to protect them against losing their principal.
Crowdfunding and Australian Businesses
When other funding options are inaccessible for your start-up business, you may think of crowdfunding as a real solution. Debt finance, business angle investment, or venture capital cannot be easily obtained by a company which is at its beginning. Moreover, they require constant repayments, as well as plenty of restrictive covenants. If your business cannot afford all these, you may have a hard time when it comes to financing.
But crowdfunding has a wide variety of advantages that you should consider. To begin with, you don’t have to make any repayments immediately. The shareholders are aware of the fact that your company will not return the funds until it does not have acquired a real profitability, which will help it sustain itself. This is definitely the biggest advantage of this solution.
Moreover, you can use social media as a way of raising funds for your business, so that you can reach a multitude of people in only a few seconds. Not to mention that this strategy also has very low costs, as it does not require any expensive advertising.
Unfortunately, the current regulatory requirements are a barrier for Australian entrepreneurs, because they have to follow some strict rules in order to benefit from the advantages of crowdfunding. However, the good news is that this situation is going to change soon, because the Australian government already discussed this topic, and they want to implement a new framework for this method of funding as soon as possible.