Have you heard the hype about crowdfunding but still have no idea whatit is or how it can help you? Well, you have come to the right place.Crowdfunding is frequently defined as a collective cooperation ofpeople who pool their money and resources (usually through theInternet) in order to support the efforts and growth of otherbusinesses and organizations. This means that small businesses andentrepreneurs are actually able to attract a "crowd" of people, all ofwhom will take a small stake in the business by contributing to anonline fund. This decreases everyone's risk while simultaneouslycreating a strong network of support for your business. If you arewilling to offer equity as well, your investors will have theopportunity to become ambassadors for your brand and will potentiallyhelp your company achieve more growth and success. Thus, crowdfundinghas become a popular alternative method of raising funds for a newbusiness or investment project.
In fact, it's getting to be quite crowded in this particular space, asalmost any business or asset is able to benefit from investmentcrowdfunding. This new method of securing capital is a veryefficient, contemporary way in which to connect entrepreneurs and smallbusiness owners with smaller sources of capital. With the passage ofthe Jumpstart Our Businesses Startups (JOBS) Act in 2012, crowdfundingreceived a significant boost, as the JOBS Act received a large amountof support due to the efforts to bring some energy back into thefaltering US economy.
Tips & Tricks for Successful Crowdfunding:
It is imperative that you understand the commitment that crowdfunding requires. This means that you need to have a solid strategy, which you can develop by perfecting and polishing your pitch. Think about this pitch as an elevator speech. Keep it short and simple.
Make sure you have all of the necessary resources in place to promote your company and your pitch. You need to make it as easy as possible for prospective investors to connect with your ideas and your business, and you should be ready to produce these materials at a moment's notice.
Think about how to create a "buzz" around your company. Find out which potential investors you want to target and then consider their interests and what would entice them to invest.
Create (and maintain) this momentum and activity by quickly responding to everyone who reaches out to you. Make sure you respond to emails and phone calls immediately, and utilize email blasts and social media to reach large numbers of prospective investors.
Always be prepared. It should come as no surprise that potential investors will likely have a million questions for you, and you should be able to answer them with ease and grace. What are you going to do with the money? What are your short and long-term goals? Do you have copyrights, patents or trademarks in place? If not, will you be acquiring these soon? Where do you see your company going?
Always be prepared. It should come as no surprise that potential investors will likely have a million questions for you, and you should be able to answer them with ease and grace. What are you going to do with the money? What are your short and long-term goals? Do you have copyrights, patents or trademarks in place? If not, will you be acquiring these soon? Where do you see your company going?
Try to refrain from the common desire to raise $1 from one million people. Similar to social media, you should not focus on getting the most investors, but rather on getting solid investors that will truly be able to help your company grow and succeed. The power of crowdfunding does lie in the crowd, but there is a very real limit to how many people you will actually be able to work with.
Be cautious about who you take money from. There are shady investors out there, and if it turns out that even one investor contributed illegally obtained money to your company, you will have to return all of it (and possibly more!).
Make sure you retain control of your company. After all, you're the only one who is able to decide the terms. On that note, make sure you communicate your terms clearly. Investors should be aware of what they are getting out of this investment.
Bottom Line: Crowdfunding provides numerous possibilities and opportunities forsmall business owners and entrepreneurs, but beware of thinking aboutthis as easy money. With a carefully designed campaign and a solidstrategy, however, you can gain significant funds to build a successfulbusiness.
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