Crowdfunding Your Small Business
Perhaps you’ve got a great idea for a new product or service and can’t wait to take the plunge. There’s just one thing holding you back: money. Unless you’ve got enough cash on hand to finance your new venture, you’ll need to find a way to raise the capital you need to get started. You could try obtaining a small business loan or meeting with a string of potential investors. Or, you could try a new trend that many small business owners are embracing: crowdfunding.
What it Is
Crowdfunding is the practice of raising money for a new business venture or project by pooling together contributions from a large group of funders. These days, there are numerous crowdfunding platforms available online that can help you get your business off the ground. Popular options include Kickstarter, Indiegogo, and AngelList, though there are many more available.
Benefits of Crowdfunding
Perhaps the single greatest benefit of Internet crowdfunding is the ability to reach a wide audience with a single platform. Thanks to social media, promoting your new venture is easier than ever, and once you have a crowdfunding campaign set up, you can simply put the word out there to your network and watch as more and more people learn about your business. Of course, not everyone will be willing or able to contribute, but there’s a good chance most of your contacts will be willing to at least promote your business and share your campaign link with others. And the more people you reach, the more capital you’re likely to raise—assuming, of course, that you’ve got a great concept at play.
Crowdfunding can also be far more efficient than traditional methods of financing a new business. Typically, small business owners would need to sink lots of time into drafting proposals, developing in-depth business plans, creating presentations, and meeting with potential investors. With crowdfunding, you don’t have to spend as much time spinning your wheels in order to pitch your idea to different investors and hope that somebody bites. Instead, you can put together a single campaign for all of your potential investors to see.
Types of Crowdfunding
There are different methods of crowdfunding that you can pursue for your small business, the most common of which include:
Donations: This method involves asking people for money to fund your business without offering anything in return. It is typically most successful for businesses with a charitable or socially beneficial undertone, since you are essentially asking for charity yourself.
Rewards-Based Crowdfunding: With this method, you’re offering your investors some sort of incentive for contributing to your business, usually in the form of a sample of the product or service your company is looking to feature.
Equity-Based Crowdfunding: This method allows investors to pursue an ownership stake in your business in exchange for their capital. Some small business owners don’t like this model because it means giving up shares of their company, but it can be more efficient than asking for donations or pursuing a rewards-based campaign.
No matter what type of crowdfunding platform or strategy you choose to employ, before you get started, be sure to put together a clear, cohesive message about what your business entails and what you’re trying to accomplish. The more compelling your campaign, the more likely you are to see those funds start rolling in.