Bottom Line Inc

Crowdfunding for Your Business

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Entrepreneurs, artists and other innovators raised more than $5 billion in 2013 through “crowdfunding” Web sites such as Kickstarter and Indiegogo. These sites let people finance projects by soliciting small contributions from large numbers of supporters. The contributors don’t receive stock in the company, but they typically receive some other reward for their support. But successful crowdfunding campaigns take time and effort, and more than half eventually fail to reach their monetary goals. To succeed…

Raise your name recognition before you raise funds. If you don’t already have an extensive network of people who think highly of your ideas, spend two to six months becoming a respected member of relevant online and real-world communities before launching a crowdfunding campaign.

Helpful: Participate in LinkedIn, Twitter and Meetup groups that discuss topics related to your business idea.

Market your campaign in waves. Ask close friends and relatives to contribute as soon as the campaign launches. Solicit contributions from other contacts only when those contributions already are coming in. People who don’t know you are more likely to contribute if they see that others are already doing so.

Reward your contributors with your product. That has a lot more appeal than a T-shirt with your company logo. Example: The Pebble smartwatch company offered backers who contributed $115 a smartwatch when it became available, effectively letting contributors preorder the $150 Pebble at a discounted price.

Set your crowdfunding goal at the amount required to reach a “milestone” for your company. Examples of milestones: The cost of your first production run of your product…the amount you need to sign a lease on an office/factory, etc. It is a good idea to start with a small financial goal for your fund-raising, then once you raise that amount, go back to the crowd for follow-up contributions. While there are a number of $1 million success stories on Kickstarter, the vast majority of successful campaigns on the site raise less than $25,000.

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Source: Jason Best, cofounder and principal of Crowdfund Capital Advisors, a crowdfunding consulting firm. Based in San Francisco, he coauthored the investing framework used in the JOBS Act that soon could legalize equity and debt-based crowdfunding in the US. He coauthored Crowdfund Investing for Dummies (For Dummies). CrowdfundCapitalAdvisors.com

Date: March 15, 2014 Publication: Bottom Line Personal
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