New Delhi, Jun 8 (KNN)  In a new fund-raising technique called crowdinvesting, business owners are encouraging customers to invest in their businesses.
 
It is similar to crowdfunding where organisers raise funds for artistic projects from music and films to festivals and fashion.  However, instead of making a donation for which they might get rewards or gifts, crowdinvestors put money into a business and get a small stake in the firm, according to a BBC report.

Crowdinvesting appears to be an innovative way for small units to raise funds, especially when they need money to expand, advertise, hire staff, etc.  There is not much to lose - if an entrepreneur fails to raise the full amount, the funds go back to the investors and he gets nothing. 

Evidently, it makes business sense to crowdinvest.  Your customers naturally like your products and might flock to your outlets during sales.  If they put money into the firm, as investors and if all goes well, they are might get their money back and more. 

Considering that banks think twice about lending to young firms, it seems like a good option for start-ups and new firms.

Crowdinvesting is aimed at small and fairly new firms.  While entrepreneurs set out how much money they need and - usually through a website - individual investors can put in big or small amounts of cash. If the fundraising target is hit, the business gets the money and the investors get a stake in the company.  But if they do not attract enough cash inside a fixed time, then the investors' funds are returned and the entrepreneur gets nothing.

The BBC report goes on to say that globally, the bulk of small businesses and start-ups fail, 95 per cent do not last five years.  It is to that segment of units that crowdinvesting can appeal to.

Significantly, the concept is founded on trust.  Although it is not regulated as an industry, it involves transparency and background checks, so that investors feel secure.
Essentially, through crowdfunding, you access your very own customers, your friends, your followers and those that live around you – your existing community. 

All said and done, crowd investing which opens new avenues is not without issues.  The danger exists, of investors blinding investing because they like a product or an individual. 

But if you are successful, you may have many investors – serious or otherwise – those who believe in your product.  That way, you can harness the power of the crowd!  (KNN)