September 23, 2012 (Powerhomebiz.com) What is Crowdfunding?
Crowdfunding pools together small amounts of funds provided by individuals or groups to financially support developing entrepreneurs. The concept of crowdfunding isn’t a new one. After all, fund raising has been around since the beginning of time, but since the passage of the Jobs Act of 2012, it’s becoming a viable resource for a growing number of budding entrepreneurs wanting to stay afloat in a fledging economy and very competitive business market. Donations, philanthropic funding, and sponsorship-based funding are the most recognized examples of crowdfunding in action. And these examples of crowdfunding are certainly not unfamiliar to the nonprofit sector. However, what makes crowdfunding different when used in the private sector is its approach. In the private sector, crowdfunding is used to financially support, develop, and mentor small and developing business owners in local communities or abroad.
How Does Crowdfunding Work?
You might be an entrepreneur needing funds (capital) to start your business, a professional in your field needing funds to finalize a music, screen, or education project, or an established business owner wanting to expand your business in a local community. Crowdfunding can provide the resources you need, which can be donated by anyone, including friends and family, who become a “crowd” of your personal cheerleaders and supporters. Currently in the US, Crowd Funders are not investors in the traditional sense, so they don’t get a stake in your business or a monetary return on an investment.
However, in exchange for their financial support, crowd funders receive rewards, which are ultimately determined by the entrepreneurs. Nowadays, everything takes place on the Internet. Therefore, whether you’re an entrepreneur or someone wanting to support an entrepreneur, the latest way to participate in crowd funding is to choose a trusted web site that has a well-established Crowdfundi ng program. Entrepreneurs must be registered before submitting a pitch (a solid and detailed business plan that includes the amount of funds needed) to be eligible to receive funds. The steps for joining a Crowdfunding program usually follow this order:
. Step 1: Register with a Crowdfunding web site of your choice (Remember to do your research)
. Step 2: Submit your best pitch (a thorough business plan and amount of funds needed)
. Step 3: Your pitch is accepted and your business plan is now visible to prospective funders on the web site
. Step 4: You actively promote your pitch to attract the largest number of funders
. Step 5: You receive the capital you need from funders in exchange for rewards, which you, the entrepreneur, must determine and dispense
Why You Should Consider Crowdfunding A Strategy for Raising Capital
At the heart of every successful business is the owner’s, President’s, CEO’s, or CFO’s ability to generate cash flow and consistently raise capital to keep a business thriving. That is why it is so important to not simply rely on one strategy for raising capital.
Multiple strategies that work must be used to achieve and maintain success. Crowdfunding can certainly serve as a supplemental strategy to your marketing, networking, and other means of obtaining financial support for your business. I can’t emphasize how important it is to not wait for investors and funders to come and find you.
Neglecting to constantly promote and market your business on a Crowdfunding web site and everywhere else is tantamount to putting your home up for sale and rarely letting people know that it’s for sale. The first investor in your business is yourself. If you don’t invest the time, energy, and consistent care that it takes to fully develop a business, then you’re simply wasting your time and energy.
You should also be sharing your pitch and business plans on social networking web sites, such as Facebook, LinkedIn, and Twitter. The goal is to let people know that you and your business exist. You could also post a link to your pitch and a short description of your business on a blog or you can create a blog making your business the focus.
Helpful Tips for Using Crowdfunding to Raise Capital
When promoting your pitch, don’t forget about emailing a link to the Crowdfunding web site that features your business to family and friends. People who want to see you become successful are your greatest allies. Let everyone know about your ventures and your need for funding. Tell them about your goals, your vision, and aspirations. Direct them to the Crowdfunding web site that is featuring your business plan and ask them for their financial support.
Equally important, never forget to follow through on all agreements by determining the rewards that you will provide your funders in exchange for their financial support. Establishing trust is the key to maintaining business relationships that you might need in the future. Remember to choose a Crowdfunding web site that makes distributing rewards to funders easy.
Finally, remember to do research and consistently use multiple strategies for raising capital. Crowdfunding could be another strategy that you use for raising capital for your business, but it shouldn’t be the only strategy that is used. Create a portfolio to maximize the potential of your business and let Crowdfunding be a stepping stone toward your business’ growth and success.
Crowdcusp
4555 MacArthur Blvd. Suite G4 NW
Washington, DC 20007
(202)207.5939
http://www.crowdcusp.com