Crowdfunding to Kickstart Your Project
|Gina Blitstein combines her insight as a fellow small business owner with her strong communication skills, exploring topics that enhance your business efforts. That first-hand knowledge, matched with an insatiable curiosity to know more about just about anything, makes her a well-rounded writer with a sincere desire to engage and inform.|
Crowdfunding to Kickstart Your Project
Just because you’re a business owner doesn’t mean that your existing company is your only passion. It’s quite likely that, as an entrepreneur, you frequently come up with ideas for new businesses, products, services… it’s the way our minds are wired. But having an idea and having the means to turn it into a reality are decidedly different things. Financing a new venture, even a sound one, can be difficult and daunting. Fortunately, there is a novel solution to getting the capital needed to get your new idea off the ground: crowdfunding.
According to Forbes, crowdsourcing is defined as “the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet.”
There are a number of crowdfunding platforms, including Indiegogo, RocketHub and Kickstarter, which is the one on which the information in this article is based. The way they operate is quite straightforward. A project (or campaign as it’s often referred to) is created (defined, explained and made available) for potential investors to see on the crowdfunding site. The project creators determine the total investment necessary to fund their venture. If and when that financial goal is reached by promised donations, the project is funded and the creators receive the pledged monies. If the project does not reach its goal, no money is collected from investors. As an incentive to donate, rewards are offered at various investment levels.
Advantages to crowdfunding
Gauge interest in your project - Sure, you believe your idea is positively inspired… but what about others? Taking the opportunity to float your idea in front of the general public will give you an indication as to whether it’s going to catch attention or sink like a lead balloon. It’s better to know before embarking on a new project if it has potential or not.
Generate excitement - Crowdfunding is a reliable way to build traction for your idea. This is your chance to showcase your enthusiasm for your project and explain why it’s something in which people would want to invest. You have a great deal of control over how your idea is presented at this stage of the game, so take full advantage of it!
Provide information for your business banker - Thought of as an early stage of a new venture, crowdfunding presents an opportunity to gather some intel to share with your business banker. Having proof of genuine interest in your venture could help him or her be more willing to loan you money for this initial stage of your project for for further development.
Recommended practices for crowdfunding
Fully outline your idea - Personally invest in your idea by committing it to writing. Detail the what, why and how as clearly and completely as you can. Brainstorm such things as your potential customers, markets, production and distribution methods… Even if these things eventually change from this initial consideration, at least you’ll be looking at the nuts-and-bolts of the venture in a realistic manner.
Create your own “advisory committee” - Select a small group of people whose opinions and points of view you trust and respect. Pitch your initial idea to them - either your written outline or provide them a verbal account. The outline will probably be more informative but the verbal presentation will convey your confidence and enthusiasm. Then sit back and listen to their feedback. These early eyes and ears will identify where your explanations fall short and will help tweak your project to be more practical, advantageous and appealing.
Articulate a clear goal for your crowdfunding campaign (and future steps you’d like to take with the venture) - Potential investors will want to know in detail what their donation is going to allow you to do. Be clear in explaining precisely what the money is earmarked for. Will it be used to manufacture the first of your products? Perhaps you plan to use the funds to expand your existing product line? If your venture is brand new, spell out your goals for the future of your undertaking, beyond the scope of this campaign.
Be ambitious but not overreaching - In determining your campaign’s financial goal, it’s wise to reach for the stars…while keeping one foot squarely grounded in reality. You want to set your budget high enough so that you can actually do what it is you have planned. But you certainly don’t want to go for such a high amount that it won’t be reachable. It’s important to get as specific and realistic information as possible regarding costs so that the amount you seek is appropriate to your stated goals.
Heed the platform’s advice - It is definitely worth your effort to absorb all the resources provided for campaign creators. This cannot be overstated. They want you to succeed so that they can reap the percentage they take from your campaign. So consider the information they provide as relevant and beneficial.
Whether you’re a new or established small business owner, crowdfunding provides a helpful opportunity to get a new venture going. It may not take the place of a bank but it offers some unique benefits to those with a big idea and limited seed capital.
Could your passion project benefit from a crowdfunding campaign?
Read other Gina articles