It used to be when you started a business the best source for money was your right or left pocket, closely followed by the 3 F’S – friends, family, and fools. Then, later, angel investing and venture capital became popular. Now there’s a new way to get resources for a small business – crowdfunding. There are more than 450 active crowdfunding websites with more popping up daily, but the big three in crowdfunding are kickstarter.com, indiegogo.com and rockethub.com. These sites will take 5%-8% of what you raise as a commission fee, but there’s no limit on what can be raised.
When you sign up for a crowdfunding site, first you must decide on a goal and a time frame. You can choose up to 60 days to achieve your funding goal. But here’s the deal, choose your financial goal carefully and conservatively, because if your goal is $5,000 and you get $4,999.00 in pledges and donations– YOU GET NOTHING. All the pledges are returned and your campaign is considered unsuccessful.
Fans of crowdfunding say the resource model unlocks the ability for people who could not raise capital in the last five years to launch their dream. While high-tech projects like Pebble’s E Paper Watch, who raised $10 million on Kickstarter earlier this year and have yet to deliver one watch, come to mind when discussing crowdfunding, most of the campaigns raise less than $10,000.
Woody Neiss, Partner at Crowdfund Capital Advisors says “Mainstreet USA will benefit most from crowdfunding. All the smart people do not live in Silicon Valley. Crowdfunding gives anyone the opportunity to generate capital to launch their smart idea. They can tap into their social networks to get capital to fund their businesses.”
If you want to develop a crowdfunding campaign to launch your business idea — first research which sites are right for your type of business. Kickstarter.com is really only interested in creative projects such as film, music, art, fashion and publishing, etc. Their 13 submission categories and guidelines are spelled out on their website.
Once you decide on the right crowdfunding partner, follow these 6 steps to have a successful crowdfunding campaign.
Work Your Network First. Be active on social media at least 6 months before the launch of your campaign. If you can’t get people who you know to invest in your idea, no one else will. Your first pledges will come from your personal network.
Invest in a Great Video. Video is a compelling selling tool. Be clear about what you are doing. Your content should be 2 minutes or less. Remember, you are selling yourself as much as your product or service.
Tell A Good Story. If you have a strong idea, tell a compelling story about it. Clarify your business goals and highlight your team if you have one.
Do Not Exaggerate. Be enthusiastic about your business idea but make sure you do not hype your project. If you promise things you cannot deliver, it will turn into a PR and potentially legal nightmare.
Have Great Rewards. People do want something for their donation, so be creative about what you could give them. Access to the creators of the project at a special event is a good example of a reward.
Donor Relations is Critical. Have a plan to communicate with your network and your donors after the funding campaign is over. You want to keep the people who donate engaged and excited, because you may need to raise more money again in the future.
Do you have any experience with a crowdfunding platform to share?
Melinda F. Emerson, known to many as SmallBizLady is one of America’s leading small business experts. As CEO of Quintessence Multimedia, Melinda educates entrepreneurs and Fortune 500 companies on subjects including small business start-up, business development and social media marketing. Forbes Magazine named her #1 woman for entrepreneurs to follow on Twitter. She writes a weekly column for the New York Times, and hosts #SmallBizChat Wednesdays on Twitter 8-9pm ET for today’s entrepreneurs. She also publishes a resource blog http://www.succeedasyourownboss.com Melinda is also bestseller author of Become Your Own Boss in 12 months; A Month-by-Month Guide to a Business That Works.
Excellent post Melinda! I’ve been doing a lot of research recently on CrowdFunding because more and more clients are asking how they can use it to fund their business and projects. I think it’s a great concept – one that’s still in it’s infancy. Thanks again for the informative write up!
Pam Lawhorne
Excellent post Melinda! I’ve been doing a lot of research recently on CrowdFunding because more and more clients are asking how they can use it to fund their business and projects. I think it’s a great concept – one that’s still in it’s infancy. Thanks again for the informative write up!
Pam Lawhorne
Amazing post, I would agree with everything in it. I recently funded an entire movie (that we are now shooting – thanks for the lovely folks who chipped in) through friendfund.com and although it took a lot of time to campaign for the money, I still did it under a month. And I don’t think this would be possible, if I went about it the traditional way.
I love’s the reference of the acronym KISS check – Keep It Simple Stupid. This test is true in that scenario and for blogging.
opps wrong post