Benefits of Crowdfunding for Entrepreneurs: 7 Key Advantages in 2025

If you’re an entrepreneur looking to launch a new product idea, you may have heard of crowdfunding as a possible option. Traditional funding methods range from things like applying for business loans, acquiring angel investments, and even self-funding with your savings and credit cards. But what if we told you that crowdfunding is a better way to launch than all of them?

You may be curious about what makes trying to raise money from others so great, but over the course of thousands of product launches, we’ve come to understand the full scope of benefits of crowdfunding for entrepreneurs. In this post, we’ll lay out the 7 key advantages of crowdfunding, as well as how to maximize those benefits for long-term success.

Key Takeaways

• Understand crowdfunding benefits for small businesses and why you should take advantage of them
• How to maximize the benefits and turn them into long-term success
• Learn the LaunchBoom strategy for planning and launching a crowdfunding campaign

What is crowdfunding for entrepreneurs?

Crowdfunding is something that has been around for decades, and has become a major force for entrepreneurs thanks to the internet. In the most basic terms, crowdfunding is a way for people to generate capital for people online. These strangers on the internet are called “backers” because they get inspired by your product pitch and elect to help get your invention idea built.

In exchange for financial support, backers expect to get something in return, whether it’s in the form of your product in rewards-based crowdfunding or equity in your company in equity crowdfunding. But who are the types of audiences willing to do this for startups and entrepreneurs that don’t have major resources or brand-name recognition?

Let’s look at something called the product adoption curve, which visualizes the different categories of people who buy new technologies, ideas, or products.

The majority of the crowdfunding community fall into the first two columns: “Innovators” and “Early adopters.” In essence, these two groups of online backers are people who love supporting cool stuff before anyone else — and getting rewarded with great discounts for doing so. Innovators and early adopters are more prone to taking risks backing brand new projects, and are therefore a bulk of the audience you’ll be targeting with your crowdfunding campaign.

Now that you know what crowdfunding is and who your backers are, we can explore the various benefits of crowdfunding and why it’s widely used by entrepreneurs across the world.

The 7 core benefits of crowdfunding for entrepreneurs

Crowdfunding differs from e-commerce in that backers know they are not receiving your product right away. Instead, they give you funding to help finance the first run of production that will bring your product to life. This type of funding has a number of benefits that make it an attractive option for entrepreneurs. In this section, we’ll break down the 7 core benefits of crowdfunding that make it the best option for launching a new product today.

1. Access to a global pool of backers

We touched on the type of audiences you’ll typically find in crowdfunding, but did you know that those same innovators and early adopters are distributed globally? That’s right, even if you’re an entrepreneur based in North America and running a campaign on a platform like Kickstarter, it’s still possible for your project to reach an overseas audience thanks to the connectivity of the internet.

Geographical location does become an important factor depending on what your goals are and what kind of project you’re launching, so make sure you know about the best Kickstarter alternatives when choosing where to launch. Optimizing your campaign to reach specific global audiences can play an important role in whether you succeed in crowdfunding or not. Moreover, some platforms are better equipped to handle different global currencies, so take that into consideration as well depending on where you are launching from or who you are targeting.

2. Early validation and market feedback

When it comes to validating a product idea, there are two primary questions you want to answer:

• Is there a market for my product with proven demand?
• Can I differentiate myself from the competition?

If you’re launching a product the traditional way, how do you know people will actually buy all of your inventory before you invest so much to manufacture it? Unless you have a time machine, you don’t; however, crowdfunding is how entrepreneurs can get early validation and market feedback for their product before spending a dime on production.

In crowdfunding, people validate good ideas with their wallets. Instead of trying to conduct market surveys and asking people if they would buy you product, you present people directly with the option to put their money where their mouths are via a crowdfunding campaign.

And since your product idea gets put in front of the eyes of so many potential people, you also get the benefit of fast market feedback. Innovators and early adopter audiences in crowdfunding are usually a great source of honest feedback for new product ideas. This can help you further refine your product features and messaging before bringing it to the mass market on e-commerce.

3. Community building and brand loyalty

It’s hard to understate the importance of community building when launching a new product or brand. In addition to being a significant benefit, community is arguably your most important crowdfunding resource. This is because they don’t just provide funding for your campaign, they become part of the foundation for your post-crowdfunding success.

At LaunchBoom, we often stress the importance of creating channels where your community can come together around you and your brand. Platforms like Facebook, Reddit, and Discord are great places where you can engage with your global audience — and better yet, let them engage with each other.

Crowdfunding platforms have communication tools built-in, but those are usually only accessible after someone has already backed. Be sure to advertise clearly and often where your potential backers can get in touch with you and your community before you launch. This way, if they have questions about your product or campaign, you or your community can address them directly. This type of communication goes a long way in establishing brand loyalty, which is essential for the longevity of any entrepreneurial venture.

4. Marketing and brand awareness

Crowdfunding campaigns can also double as marketing campaigns, as they help spread awareness of your product and brand. Attractive campaign pages, campaign videos, and social media posts can all work together to boost brand visibility and build trust with potential customers in the future.

Having a standout campaign also increases your chance of landing solid PR from traditional media outlets. If a top tier media publication likes what you’re doing, you might be able to get featured to their audience. Getting seen or reviewed by certain publications also lets you use it as social proof through the use of logo clouds and testimonials like this:

This adds tremendous credibility to your brand, and can help you reach audiences you never thought possible through conventional digital advertising channels.

5. Reduced financial risk

Reduced financial risk is arguably the biggest benefit of crowdfunding, because it allows people more freedom and control over their business decisions. In traditional product launch scenarios, you’d have to finance your first batch of inventory yourself, or through other funding methods. You’d need this payment upfront, putting yourself at major financial risk before you’ve even sold a single product.

The beauty of crowdfunding is being able to generate revenue before even launching your new product. With nothing but a working prototype, you can launch a full campaign on Kickstarter and potentially raise millions of dollars before even having finalized all of its features and designs. Effectively, the financial burden of paying for a product launch is spread amongst all of your backers.

And in the event that you don’t succeed in raising money, crowdfunding at least lets you fail somewhat cheaply. It costs nothing to run another campaign on the major platforms like Kickstarter and Indiegogo, and whatever money you spent on creative assets like photos and video can be used again if you decide to try once more.

Failure in crowdfunding can be seen as a learning experience, where you gather enough data at an affordable price to learn how you can improve for next time, like with the Hipstar crowdfunding campaign. You can test your ideas — good or bad — until you refine your strategy or product enough to the point where the market tells you they’re finally ready to back it.

6. Networking and partnership opportunities

While running a crowdfunding campaign, there may be some interesting opportunities to network and form partnerships with other entrepreneurs. A common practice during live campaigns is to cross-promote with other product creators. This happens when two or more different campaigns mutually agree to showcase the other’s product to their backers.

Most of the time, the campaigns that you cross-promote with will be of a similar size to you. And if there’s product synergy, there might be good crossover between the different backer bases which leads to a higher crowdfunding raise for all parties involved. When cross-promotions are beneficial for all, this forms a good basis for potential partnerships between the different parties moving forward.

But crowdfunding isn’t just great for building partnerships between new brands; it can also position entrepreneurs for partnerships with major retailers or investment deals. If you have a product that the market demonstrates massive demand for, this can catch the attention of major players who might be interested in working with you to continue selling your product moving forward.

7. Storytelling opportunities

Lastly, crowdfunding encourages entrepreneurs to tell brand stories in an authentic way. Campaigns are primarily about communicating the value of your product, but they can also thrive on personal stories. Creators can share their journey, motivations, and challenges that can set them apart from competing product launches, fostering an emotional resonance with potential backers.

Once backers have joined your campaign community, make them feel part of the story. Through things like updates and milestones, you can show progress and celebrate achievements to keep everyone engaged with what’s going on with your brand. Some ideas for engaging storytelling content include:

• Behind-the-scenes shorts
• Origin story videos
• Team interviews and profiles
• Inspirational posts
• User-generated content (UGC)
• Etc.

But remember: One of the keys to effective storytelling is transparency. Your audience can be more perceptive than you think, so it’s always best practice to be honest. Don’t gamble with the reputation of your new brand by trying to deceive people with your storytelling.

How to maximize the benefits of crowdfunding for entrepreneurs

Now that you know the benefits of crowdfunding for entrepreneurs, we can explore the various strategies for maximizing those benefits. From researching the right platform, to building pre-launch hype, to getting help from experts, there are a number of effective ways for extracting maximum benefit from your crowdfunding campaign.

Research the right platform

It’s important to optimize every aspect of your crowdfunding campaign to maximize success, and that includes selecting the right platform. When it comes to crowdfunding, it’ll likely come down to Kickstarter and Indiegogo due to the versatility they offer and the size of their userbases.

The first thing you need to understand when deciding between these platforms is what the rules are for running a campaign. Kickstarter has five primary rules all campaigns should follow:

1. Projects must create something to share with others.
2. Projects and backer statistics must be honest and clearly presented.
3. Projects can’t fundraise for charity.
4. Projects can’t offer equity.
5. Projects can’t involve prohibited items.

Indiegogo’s rules are slightly different:

1. Prohibited behavior includes harassment, hate speech, dishonesty, spam, nudity, and graphic or violent content.
2. Gambling, investments, profit sharing, and drug or alcohol references are prohibited.
3. All projects must provide monthly updates for backers and perks must be fulfilled.
4. Cross-promotion is forbidden.

Another key distinction lies with functional prototypes. A functional prototype is one that has all of the features you claim your product can perform in your marketing. On Kickstarter, you must prove you have a working functional prototype on your campaign page. Indiegogo, though, doesn’t require a working prototype to launch, meaning you can use 3D renders on your campaign page as long as you clearly specify that your product is still in the concept phase.

Other key differences between these two platforms include:

So, which is better? That all depends on the needs of your campaign and the goals you have. Both feature enough tools to help you maximize success, so carefully research where you think yours will fit best based on the characteristics of each platform.

Craft a compelling campaign page

No matter what platform you choose, it’s essential to hit a homerun with your landing page. This is your main landing point where people will finally decide whether to back your product or not, so it’s important to spend a lot of time crafting the page. You’ll need two key ingredients for a compelling campaign page:

• Captivating visuals
• Persuasive copy

While that’s easier said than done, we can demonstrate what we mean by looking at some examples from the campaign run by our friends at Give’r. One of the first tips we recommend trying is using feature clouds. Here’s one Give’r used:

These diagrams are great for showing all the core features of your product in one easy-to-understand graphic and are much easier to digest than a bunch of text. In addition to feature clouds, try also incorporating some gifs on your campaign page. They’re effective at breaking up static pages, and they’re usually better at conveying certain functions compared to still images.

The next tip you want to implement is building a clear visual hierarchy. Create a consistent structure for your headlines, subheadlines, and supporting copy all the way down the page. This helps to guide viewers through your page and draw their eyes to what’s most important. Here’s an example by Give’r:

Headline

Subheadline

The brighter color draws eyes to the main benefits of the product, and the subheadlines expand on those ideas. As a bonus note, we also suggest uploading headlines and subheadlines as images to the page like the ones shown above. This will ensure these all-important snippets are still clearly legible for mobile viewers.

Build buzz before launch

Everybody wants to have a massive launch and hit their funding goal on the first day. In fact, it’s a key reason why our strategy outperforms traditional product launches. But how do you build enough buzz before a campaign to accomplish this feat? The secret lies in your pre-launch reservation funnel.

A reservation funnel is a landing page where you can collect email addresses and $1 reservations from people who want to back your product for the best discount on launch day. Including this monetary reservation represents a 30x more likelihood that the person will show up and you’re your product as opposed to someone who only provides an email — and our data backs this up over thousands of crowdfunding launches.

Here’s a general overview of what the funnel looks like and how the landing page fits in:

As you can see, building buzz and driving traffic starts with Meta Ads. Other tactics you can supplement include things like email newsletters and influencer outreach, but the most effective tactic is to get as many eyeballs on your funnel as possible. The best way to accomplish this is through thoughtful digital advertising aimed at your target audience provided by Meta’s network.

Once you have people in your funnel, you can then start turning them into your brand community, generating buzz through direct engagement.

Engage with your community

Community building is essential for crowdfunding, because it can have a profound effect on the long-term success of your brand. The foundation you set in the early stages of community engagement is how you turn fans of your campaign into lifelong supporters. But first, the goal is to nurture them to maximize the raise of your crowdfunding campaign.

Start by creating pages where your community members can engage with you and each other. This can be a private Facebook group, a Discord server, or even a dedicated page on Reddit. Those who join these online communities will continue to be the most closely engaged, so share details and updates about your project here first.

Other best practices for engaging with your community include responding to comments, participating in discussions, and answering all questions transparently. And after your campaign, you can even run polls and gather feedback to help improve the things your fans would like to see.

Leverage expert guidance

Although we’ve shared our tips on how to maximize the benefits of crowdfunding for entrepreneurs like you, admittedly there’s no perfect one-size-fits-all solution. Every campaign has its own needs that can affect the strategies you use.

We at LaunchBoom understand this, which is why we also preach the effectiveness of leveraging expert guidance. If you’d like to learn more about how to maximize your crowdfunding campaign, book a call with us and one of our product launch experts will help tailor the right strategy for your crowdfunding goals.

5 Effective crowdfunding strategies entrepreneurs can implement

We’ve reviewed the benefits and various strategies for getting the most out of crowdfunding. Now it’s time to put it all into action. Here are 5 effective crowdfunding strategies — with real-life examples — anyone can implement on their next crowdfunding campaign for positive results.

Highlight community building

When you bring your community of superfans together, good things can happen. The team behind The Crooked Moon, a folk horror-themed Dungeons & Dragons 5e supplement, took great care to build a thriving community around their brand.

Knowing that their entire audience would be gamers, they set up a Discord server where they could interact directly in a way that felt authentic to that community. Discord is a free communication app that lets users chat, share photos, and open voice chat rooms which gamers often use to communicate while playing.

The result of this community building process was a major sense of familiarity between everyone, and a close level of following that the team embraced and celebrated. On their launch day, the team hosted a live stream on Twitch and invited their community to hang out with them on their first day of going live with their campaign. The results were staggering:

This launch day party helped to generate a lot of momentum within the community that encouraged members to join the party and support the product. They raised $1,673,903 directly from their pre-launch email list and $4,020,234 overall.

Regularly update backers

One of the easiest things you can do to build a better image of your brand is maintain clear communication with backers. It really boils down to one general rule of thumb: If something happens that affects your campaign — positive or negative — your backers should know about it.

It may sound like straightforward advice, but there are certainly pitfalls you’ll want to avoid when it comes to updating backers. Here are some of the things that might negatively impact your reputation with backers:

• Don’t neglect platform updates: Crowdfunding platforms have Updates features built in, giving you direct access to communicating with backers. Share information like project progress, visual content featuring your product, and contact information if they need to get in touch with you directly.
• Don’t have long pauses in communication: Even if you have nothing major to report, try to stick to a schedule of updates at least every two weeks to keep backers informed. Long spells of silence might give people the wrong idea about your campaign.
• Don’t give backers false hope: One big mistake people make is setting a hard date for when your product will be ready, or start shipping. Failing to meet these expectations can have adverse effects, so instead use language like “expect products to ship next month,” or “production is on track for next month,” etc.

And lastly, don’t forget to add a personal touch to how you communicate. Part of building a connection is engaging in fun ways unique to the personality of you and your brand. To learn more about the dos and don’ts of crowdfunding campaign communication, check out this extensive post on the best practices you can apply to your own product launch.

Utilize emotional storytelling

The biggest priority is to communicate the value of your product in your marketing, but sometimes the story is as important as its unique value proposition. Let’s look at a recent Kickstarter launch we were a part of: the SeatMate.

Founder Andrew Mueller set out to solve a problem he was having where his dog Willie needed attention that he couldn’t give while doing various tasks at home. That solution he created was SeatMate, and it was very much inspired by his love for his pet. He showed that fact off on his campaign page with imagery like this:

Cute photos of his dog and others was a great way to establish an emotional connection with his target audience. People who would be buying this product would definitely be pet owners, so he did the smart thing of featuring tons of cute pets in his product marketing and storytelling.

Even his hero section at the top of his campaign page — arguably the most important real estate in crowdfunding — reinforced the emotional connection people have with pets.

With copy like “Office furniture for your pet,” and “Hang out together all day,” people know exactly the value they’re getting out of his product. Andrew managed to raise $211,177 in just one day, and $488,623 in total for his Kickstarter launch.

Offer early bird rewards

The key to the pre-launch reservation funnel is the $1 deposit. And the key to persuading people to make deposits before buying anything is to promise an irresistible early bird reward. Gamal Jadue Zalaquett did just that with his launch of Kosmos, the most funded hotel crowdfunding project ever on Indiegogo.

The idea for Kosmos was to provide an amazing stargazing experience for glampers. Gamal bought 40 acres outside the Great Sand Dunes National Park to build 20 eco-friendly villas that would come with their own telescopes so guests could stargaze from their campsite.

Instead of a $1 reservation, though, VIPs would have to make a deposit of $50. Why so high an asking price? Because the early bird reward was too good to pass up. Retail for the rooms started at $350 per night for the basic option, and $700 per night for the more luxurious option. VIPs who backed early would get to reserve their first Kosmos experience for 50% to 59% off.

Thanks to the effectiveness of this discount they were able to build a list of 5,802 VIPs from their pre-launch funnel. The total revenue earned from these deposits was $290,100, giving Gamal the confidence that his campaign would be a success. Kosmos went on to raise a total of $1,948,787.

Set clear, realistic goals

Something detrimental that happens to many product launchers is setting unrealistic goals. People see the potential short-term cash benefits of crowdfunding and focus solely on maximizing that. And while having a strong raise is something to strive for, the definition of a strong raise should vary according to each campaign. It’s not as easy as saying “You need to raise X to be considered a success.”

There are three primary goals you need to have as an entrepreneur getting into crowdfunding:

• You acquire customers profitably and thereby validate you have a market
• You pay for your first manufacturing run
• You ship your product at a reasonable turnaround time

It’s vital to understand that with any crowdfunding campaign or product launch, it costs a lot to get something off the ground. Because there are so many expenses involved, very few campaigns make a profit. If long term success is your goal, though, the clearest objective you should have is validating that you can acquire customers profitably. When you can do this, you are more likely to turn crowdfunding success into a long-term e-commerce business.

Final thoughts on the benefits of crowdfunding for entrepreneurs

For entrepreneurs who are just starting out, remember that crowdfunding offers more than just financial benefits. Overall, it’s a comprehensive strategy that includes benefits like market validation, community building, brand awareness, partnership opportunities and reduced overall financial risk. These are invaluable assets to have when building for a long-term business future, and are why we believe crowdfunding is the number one way to bring a product to life.

But if you’re still unsure about the benefits of crowdfunding for entrepreneurs like you, LaunchBoom is here to help. Book a call with us today, and one of our product launch experts will get in touch with you soon with insights on how to take your product idea from dream to reality.

Frequently asked questions: Benefits of crowdfunding for entrepreneurs

How does crowdfunding help entrepreneurs?

Crowdfunding provides not only funding, but a host of other benefits as well. The benefits of a crowdfunding campaign include market validation, community building, brand awareness, partnership opportunities and reduced overall financial risk.

What are the advantages of crowdfunding?

There are a number of advantages of crowdfunding for startups. Launching a product idea through platforms like Kickstarter and Indiegogo can set business up for long-term success by proving that they can acquire customers profitably, thereby validating that a market exists. Additionally, crowdfunding helps pay for the first manufacturing and fulfillment run, ensuring there’s no need to go into too much debt before even selling a single product.

Why crowdfunding may be advantageous to new entrepreneurs?

There are several crowdfunding advantages for new ventures. For example, if your product is still in the conceptual phase, you can start raising revenue via crowdfunding before you even have a working prototype. This boost in capital then allows you to pay for final prototype development, as well as generate your first round of inventory.

What are the pros and cons of using crowdfunding for your business?

While crowdfunding offers funding, marketing, and community benefits, it also requires significant preparation, ongoing engagement, and a compelling story. Entrepreneurs with limited time, resources, or marketing know-how should weigh the time and effort against the potential rewards when considering a crowdfunding campaign.