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Crowdfunding To Start Your Business

[ 0 ] Apr. 15, 2014 | SBO Editor

crowdfunding

There are so many new ways to generate money to start a business and crowdfunding is helping entrepreneurs launch their dream ventures. The internet has fundamentally changed the way we do business on a national and global scale. With over 2 billion internet users and growing, the speed and the way in which we communicate, share ideas, and even invest in businesses have changed forever.

Anyone can engage in crowdfunding to start a small business. Now anyone with a computer or mobile device and an internet connection can research, review and become an investor in a business with a push of a button. With the growing popularity of crowdfunding sites, it’s clear the idea of advertising to the general public through a crowdfunding platform is far more effective at drawing in investors as opposed to finding traditional investors the old fashion way.

Crowdfunding for Entrepreneurs

It offers them the ability to raise capital without giving up equity or accumulating debt. Instead, these rewards-based crowdfunding platforms allow entrepreneurs to raise capital from the public in exchange for tangible products or other relative rewards.

It’s simply one of the best ways to cast a huge net for attracting investors to a business. However, with all the hype and popularity buzzing around the internet, many entrepreneurial hopefuls need to be aware that just because launching a crowdfunding campaign is simple doesn’t mean it’s easy.

There is a big misconception on what it really takes to reach a funding goal and achieve success in crowdfunding. It’s not as simple as creating a campaign and clicking the submit button and waiting for an idea to go viral. The set it and forget it attitude is the number one reason why crowdfunding campaigns fail.

Did you know of the roughly 60,000 unsuccessful crowdfunding campaigns launched, about 40,000 failed to reach even 20% of their funding goal? The good news is you can succeed in crowdfunding, you just need to know how to prepare for it.

Here are three key tips from the U.S. Small Business Administration website for crowdfunding success:

1) Perfect Your Pitch – An incredible pitch is crucial for crowdfunding and can make or break landing an investor. People have to be sold on you, your idea and your vision before they will ever invest in your business.

For starters, write up your preliminary draft, include pictures and record a video explaining your vision, the offer and why you should get business funding. Let your passion shine through!

Send your pitch to family and friends so you can get feedback and make any necessary changes. Once you perfected the pitch, start locating initial backers before launching your campaign.

Remember, you don’t have to swim with the sharks; in crowdfunding, you get to swim with the goldfish.

2) Test Your Rewards – Every successful campaign started with a dedicated following. The obvious rewards would be to provide backers with a digital copy, physical product, souvenirs, combined rewards, etc. depending on your business idea.

Start by testing your reward ideas with your personal network, make necessary adjustments and perfect your rewards package so it is unique, eye-catching and memorable.

3) Get Pre-Pledges – Pre-pledges are commitments from those people who fully support your business idea and will be there to invest on day one when you launch your campaign. Since the majority of crowdfunding sites provide a 30-90 day time frame for each campaign, it’s vital to launch with momentum.

Did you know the most successful crowdfunding campaigns had their campaigns go live only after they had 20-30% of their business funding secured by initial backers? Let’s face it; nobody wants to be the first person to fund money into a newcomer’s campaign.

Once you perfect the pitch, test your rewards, get pre-pledges and choose a reputable crowdfunding platform, you will need to establish a marketing strategy to reach your target audience so you can advance the momentum of your campaign once you go live.

Crowdfunding sites are a strong stepping-stone for acquiring investors for a business. While for some it can be a viable option, entrepreneurs do need to conduct their due diligence to decide if this business funding option is best for them.

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Category: Features