QB3004 The Comprehensive Impact of Crowd funding Across Startup Stages

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Nov 24, 2024

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1 The Comprehensive Impact of Crowd funding Across Startup Stages Crowdfunding has become an increasingly important instrument in the ever-changing world of entrepreneurship, with the potential to greatly impact the future of businesses at different phases of their journey. Crowdfunding, according to Parhankangas et al. (2019), is a powerful tool for establishing an early community of backers and confirming market demand, especially while a concept is still in its early stages. This first stage is vital for new businesses because it lays the groundwork for future expansion. Through the use of real-world examples, this article will explore the effect and strategic concerns surrounding crowdfunding at each step of a startup's growth, delving into the intricate role that crowdfunding plays throughout. Idea Stage Ideas are delicate and the future of a startup's success is unknown while it is in its early stages. Crowdfunding, say Parhankangas et al. (2019), may help lessen the impact of such unknowns. Entrepreneurs may reach a wide demographic and get a feel for how people feel about their product or service idea by using crowdfunding sites. One revolutionary virtual reality headset that fits this description is the Oculus Rift. In 2012, Oculus proved the growing demand for VR technology and raised $2.4 million on Kickstarter, which was crucial in securing the necessary finances. Additionally, crowdfunding's community nature is crucial throughout the concept stage (Hervé and Schwienbacher, 2019). Those that invest early on in a company do more than just provide money; they become passionate supporters of the venture. Having put their money into the idea itself, these early backers often care deeply about the venture's success. By providing constructive criticism, they help bring the product or service closer to meeting customer expectations. After a successful crowdfunding campaign, the community that forms around it may provide the groundwork for further expansion. Early Stage The company moves into the early stage when an idea is verified, where they concentrate on developing products and seeking further finance. According to Kaartemo (2017), crowdfunding is most useful at this stage as it helps to attract more investors and secures funds. Startups may increase their attractiveness to angel investors and venture capitalists by showcasing a concrete proof of market interest via successful crowdfunding campaigns. An early

2 stage crowdfunding campaign had a revolutionary effect on smartwatch pioneer Pebble. In 2012, Pebble attracted a lot of attention from investors and customers alike after raising an incredible $10.2 million on Kickstarter, which allowed them to obtain the money needed for manufacture (Shneor and Vik, 2020). In addition to raising capital, the campaign served as an advertising platform, propelling Pebble to the forefront of the rapidly growing wearable technology industry. In addition, there is no better way to connect with early adopters than via crowdfunding during the first stages. The enthusiastic backers of crowdfunding projects provide priceless comments that help make products and services better before they're released to the public. Crowdfunding allows entrepreneurs and early adopters to have a two-way conversation, which speeds up the development process and makes the product more marketable. Growth Stage The focus moves from staying afloat to growing and scaling when firms enter the growth stage. Crowdfunding, according to Hossain and Oparaocha (2017), is useful at this stage for more than simply collecting money; it can also be used strategically to increase brand recognition and attract new customers. Startups seeking to expand into new markets or strengthen their position in current ones may use crowdfunding, with its built-in exposure and engagement, as a launching pad (Wang et al., 2019). This tactic is on display in the 2020 Oatly crowdfunding campaign. Oatly used the $20 million it raised on Kickstarter to not only expand its operations but also strengthen its brand ( Bocken, Niessen and Short, 2022). Through the campaign's direct customer participation, the company was able to create a feeling of community. Crowdfunding has shown to be an invaluable tool for growth-stage firms, as it prepared the way for Oatly's successful expansion into the US. Also, when a business is in the expansion phase, crowdfunding may be a good way to gauge interest in a new product or service. Startups may gauge market interest in their ideas faster and make strategy adjustments based on the results of crowdfunding campaigns. Reducing the risks of investing in untested innovations, this proactive strategy enables fast decision- making and resource allocation.

3 Conclusion Crowdfunding proves to be an adaptable and dynamic instrument that may greatly influence companies at any stage of their growth. Crowdfunding offers a multitude of benefits, from financial assistance to community development, market insights, and vital validation, across the whole ideation process and into strong growth. Entrepreneurs must, however, approach crowdfunding with a sophisticated awareness of its benefits and its drawbacks. Not every crowdfunding campaign reaches the pinnacle of success, but tales like Oculus Rift, Pebble, and Oatly prove that the platform can be a game-changer. Thorough preparation, clear and concise communication, and an enticing value offer are essential in the cutthroat world of crowdfunding. Community involvement, market validation, and access to funding are all advantages that entrepreneurs should consider carefully alongside the difficulties of campaign administration, fulfillment logistics, and possible scrutiny. Startups need to adjust their strategy for each step of the crowdfunding journey to meet the specific needs of that stage. Crowdfunding and startup development are both iterative processes, thus they work hand in hand to help businesses go from idea to market leader. Crowdfunding exemplifies the democratization of capital and the influence of communal support in molding the trajectory of innovation and enterprise in an ever-changing entrepreneurial environment.

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4 References Bessière, V., Stéphany, E. and Wirtz, P., 2020. Crowdfunding, business angels, and venture capital: an exploratory study of the concept of the funding trajectory. Venture Capital, 22(2), pp.135-160. Bocken, N.M., Niessen, L. and Short, S.W., 2022. The sufficiency-based circular economy—an analysis of 150 companies. Frontiers in Sustainability, 3, p.899289. Hervé, F. and Schwienbacher, A., 2019. Crowdfunding and innovation. Contemporary Topics in Finance: A Collection of Literature Surveys, pp.331-349. Hossain, M. and Oparaocha, G.O., 2017. Crowdfunding: Motives, definitions, typology and ethical challenges. Entrepreneurship Research Journal, 7(2). Kaartemo, V., 2017. The elements of a successful crowdfunding campaign: A systematic literature review of crowdfunding performance. International Review of Entrepreneurship, 15(3), pp.291-318. Parhankangas, A., Mason, C. and Landström, H., 2019. Crowdfunding: an introduction. Handbook of research on crowdfunding, pp.1-21. Shneor, R. and Vik, A.A., 2020. Crowdfunding success: a systematic literature review 2010– 2017. Baltic Journal of Management, 15(2), pp.149-182. Wang, W., Mahmood, A., Sismeiro, C. and Vulkan, N., 2019. The evolution of equity crowdfunding: Insights from co-investments of angels and the crowd. Research Policy, 48(8), p.103727.

QB3004 The Comprehensive Impact of Crowd funding Across Startup Stages

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