A Guide to Crowdfunding

Posted by: Christopher Smith | Posted on: February 15th, 2012 | 0 Comments

How can you get the cash you need for your business without having to put up with the meddlesome interference of investors? Online crowdfunding, through such outlets as Kickstarter.com, RocketHub.com, 33Needs.com and Profounder.com, allows entrepreneurs to solicit no-strings-attached funding from a large pool of investors. All that’s required is a sensible business plan and the ability to communicate that plan through the auspices of the internet.

In many ways, crowdfunding takes the place of traditional small-business bank loans, except that the entrepreneur often does not have to pay back the money she has raised. More importantly, each individual investor often can be converted into a future customer by benefit of receiving email updates or other information on the status of the project. Outlets such as Kickstarter.com require entrepreneurs to set a specific fundraising goal along with a deadline. If the total funds are not raised by the deadline, the entrepreneur does not receive any money. This encourages a far more sensible approach when asking for money. If a company needs $50,000 for a new manufacturing component, they learn to ask specifically for $50,000. However, crowdfunding is unlimited, provided the plan delineates exactly how the money will be spent. Some companies can raise millions in a single day by virtue of their excellent presentation.

For those entrepreneurs who wish to crowdfund their idea, specificity and vision are required. Putting in a plea for some cash to “help me launch a new hardware platform” will be met with silence. A detailed plan that illustrates how the hardware platform will revolutionize how people pay for merchant services by way of its insertion into smart phones will help bring in more money for the project. Professional video presentations that illustrate the future product or service in action go a long way toward convincing people to donate their funds. In short, those who successfully crowdfund understand how to communicate the brilliance of their idea in a compact form that opens hearts, minds and wallets.

Related Articles
Three Ways to Crowdfund Big Ideas with Lean Pockets (businessinsider.com)
How to Crowdfund your Next Big Idea (mashable.com)
Guide to Crowdfunding (CSEDEV.com)