Crowdfunding has now become common place for anything from medical bills to funeral and legal costs. While you may not be able to recite the definition above you likely have heard Indiegogo, Kickstarter, and Gofundme.
If you are considering a crowdfunding site for your business here are a few considerations:
ARE YOU SEEKING CROWD-FUNDING OR CROWD-INVESTING?
Not sure? Well here is the basic difference. Crowd-funding does not offer equity to those who give. You may be offering some memento as appreciation but there is not expectation of shares in the company. Crowd-investing on the other hand is equity based. In this instance those who invest receive shares in the company. Those who invest will be seeking to liquidate their shares, often to a larger investor for a return on their money. Knowing which giving model you are interested in will dictate which platform you choose to run your campaign on.
READ THE FINE PRINT!
After you have narrowed down your platform choices then read ALL the legal language. If you have chosen the investment route, then be sure to know what your obligations are to those who give. What is the expected return? Are there other terms? How soon can you get the money? What percentage of the money does the platform take? If you are unsure of the terms or what they mean consult an attorney.
DON’T UNDERESTIMATE THE DIFFICULTY!
Just because you can press a few buttons and share it with everyone in your social network don’t forget that this is still a pitch. You need a compelling story, a product that people ACTUALLY want, a marketing campaign, and finally you will have to be annoyingly persistent. If you feel as though you aren’t ready to pitch to a small group, you may not be ready to pitch on-line. So, prepare, and plan just like you would for any other set of investors.
THIS IS NOT THE FUNDING METHOD TO SAVE THE COMPANY!
You may have read where a company, as a last resort, turned online and things were great but waiting until you are in financial trouble is not sound advice. Because this method of funding takes a patience you should be sure that you are not trying to cover the basics (like salaries or sales orders) with this funding method.
My thoughts are that crowd-funding or investing work best when you have a prototype to show or a tangible product. Services may not do well with a crowd campaign. In case you are interested in crowd based platforms dedicated to business check out the link below.
Dr. Shante Williams is a serial entrepreneur who started slow and in the shallow end of the business pool. She has worked in Biotech, Big Pharma, Green Energy, and Academia