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First step on the escalator.

Document Cited in Related
Vincent
AuthorJames, Barry
PositionINFORM

Crowdfunding - raising lots of small sums from a large number of people, usually via the Internet - is starting to open up other forms of finance. in a recent North American survey by Crowdfund Capital Advisors, 71 per cent of firms that had succeeded with crowdfunding reported accepting, or being in talks to negotiate, follow-up investments.

Originally, the crowdfunding process was seen as an alternative to more conventional means of finance, particularly when banks cut back on lending as a result of the financial crisis of 2007-08. Now, although crowdfunding is often the vehicle of choice for ventures from the start-up stage onwards, the process is often considered the first step on a so-called funding escalator that will then include further support, such as angel-backed investments.

One key advantage of crowdfunding campaigns is that they enable entrepreneurs to engage closely with groups of enthusiasts and early adopters. These first supporters tend to champion the project vocally to such an extent that it generates interest more widely. This can be invaluable during the early stages of an enterprise, says Joe Cox, an economics lecturer at the University of Portsmouth who has studied crowdfunding projects. It can also operate as a form of advertising to both consumers and the industry itself, leading to networking opportunities and potential new business that can prove vital to the success of a new venture.

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