By David Kiger
The search for funding to get a small business off the ground can be a complex and frustrating experience. But we’ve moved well beyond the days of a bank loan being the only way to do it.
One of the more talked about methods of raising money is crowdfunding, in which a prospective owner lays out the plan of the business and then seeks online donations. In the primary forms of crowdfunding, those who donate can receive some sort of reward for their donation (products, discounts, recognition), or equity in the company (like the concept used in ABC’s investor program Shark Tank).
There can be significant advantages here, as Adam Heitzman writes for Inc.com: “With crowdfunding, you don’t have to find the perfect investors or figure how you’re going to appeal to the people you’re about to meet. All you need to do is find like-minded people to donate a little bit of money.”
It can also be a complicated process to navigate. Here are a few tips to presenting a business idea and following through the crowdfunding process.
Get early feedback
Prior to making a crowdfunding pitch, it is essential to seek the input of others. Jordan Kasteler describes “the planning before the planning,” in a story for Inc.com, including testing the product idea “with real people — even if it’s just a handful.” This kind of feedback can be an early indication of interest, or “save you from putting months into a campaign only to miss the mark with your key audience.” Among his tips:
- “Ask for feedback from people who are not friends or family. Explaining your product at networking events can help you gauge real interest.”
- “Present a problem and explain how your product solves it. Do people’s eyes light up?”
- “Note what type of people seem interested. Is it a certain demographic over and over? What made them interested?”
Know the goal
It’s a big question: How much money is needed? Since different crowdfunding sites have different requirements, determining that magic number is vital. Underestimating the amount may sell the idea short. Overestimating it may prevent a campaign from succeeding. Thomas Smale explores this in a story for Entrepreneur.
“… It’s important to think about how much money you need to get your business up and running, and how many people you know that would be willing to pledge. Although you may attract the attention of new people with your campaign, most of your support is going to come from those who already know you. Be realistic. Also, keep in mind that you can’t change your funding goal once you’ve initiated the campaign.”
Research the various platforms
Some crowdfunding sites generate more buzz than others. Kickstarter, for instance, was an early standout. But others may be better suited for various startups, and have different results if a financial target is not met. A prospective business owner should dive into a detailed analysis of the available options, as William Johnson writes for Smallbiztrends.com.
“The success of your campaign, to a great extent, depends on the crowdfunding Go to the full article.
Source:: Business 2 Community