Is crowd funding your cosmetic company start up a good idea? I have somehow ended up on the mailing list of a company that is putting a lot of effort into getting funding via this route. As I am not interested in investing I am finding it all a bit intrusive and annoying and I have unsubscribed, but I dare say if I was looking to invest some money I would find it more interesting. But it did make me wonder if this was a viable method of funding new start ups in the cosmetic sector.
This particular company is one that is already in existence and presumably is seeking funds to expand. They have a fairly generic natural organic offering that didn’t strike me as an obvious world beater, though thankfully they avoided using scaremongering tactics. There are lots of small companies in this sector and they all seem to do reasonably well largely because they care about their products and establish good relationships with their customers. To get beyond this requires a lot of investment in advertising and PR, and presumably this particular company has got to this point and is trying to stretch their wings.
Crowdfunding does seem like an attractive option. Rather than having to find professional investors whose money comes with strings attached you seek out ordinary people who want to invest their money in something that they personally approve of. Lots of people love personal care products and would regard this as a good thing to invest in, particularly if they have tried and like the products. You’d be able to say ‘I liked it so much I bought the company’.
There is a very obvious disadvantage. By its very nature, crowdfunding makes it necessary to reveal your plans to the world. This will instantly alert the competition, who might already be very well funded, to get ready their deals offerings and promotions to coincide with your launch. This is something that very small companies are probably not going to have experienced before. The big boys of the cosmetic industry are a hard bunch to go up against.
This problem might seem even more acute if you have an innovative idea. Surely if you are trying to get something genuinely new onto the market it is even more dangerous to go down the route where you let everyone know what you are up to. Paradoxically, my feeling is that this is not at all the case. The organic brand I was talking about earlier is following a well trod path that everyone in the business knows very well. Something new is by definition going to be something without a track record. I suspect that established players will pay it no attention.
So I would say that the crowdfunding route is better suited to the innovative company, and might well be a great way to get your great idea out there into the real world. Something that ultimately sells itself can get away without so much expensive advertising as well.
I’d also say that the same applies to anyone thinking of investing. You are more likely to lose the lot with an innovation, but you might just do very well indeed.