Erica Nicole, YFS Magazine | Feb. 4, 2011, 4:44 PM
The cost of doing business isn’t cheap. One of the primary challenges for entrepreneurs is the effective management of cash flow.
Small businesses generally lack the asset requirements necessary to qualify for bank loans. It is no surprise that small business lending isn’t what it used to be.
Big Ideas and Lean Pockets
Small businesses fail every year due to the mismanagement and lack of cash flow. While every entrepreneur has heard the adage that “Cash is King,” obtaining a quick injection of cash can be a daunting task. So, when I started my first company, I asked, “How can I master my funding without its mastering me?” Peer-to-peer lending, better known as crowdfunding, was a, seemingly, good answer. Alongside bootstrapping, crowdfunding is the perfect resource for fledgling entrepreneurs with big ideas and lean pockets.
Reward your Biggest Fans
The crowd is every entrepreneur’s biggest fan. People want to be a part of something bigger than themselves, and if you add profit or rewards to the mix, then you’re onto something. Crowdfunding enables your peers to minimize their risk and invest in business ventures they believe in. Gone are the days of pitching hundreds of venture capitalists or hoping that your local banker loves your widget idea as much as you do. One of the main reasons crowdfunding has become increasingly popular is that unlike working with traditional investors, you keep 100% ownership of your idea. Crowdfunding websites represent an excellent source of capital and offer a great platform to test market ideas and gauge consumer interest.
Focus and Fund
So, you’ve got a great project and need to fund it. What’s next? Create an account at one or more of the following crowdfunding websites. The catch is, make sure you are definitive about your project parameters. Projects such as “I am launching a clothing line,” won’t fly. The more precise the project, the better. Also, make conservative funding estimates (e.g. Do your homework). Projects that don’t reach full funding don’t get funded. Ultimately, your goal is to drive accountability with a definite start and end. While each crowdfunding platform varies in terms of allowable projects and pitches, they all represent a great starting point to help you focus your idea and fund your dream. Here are 3 websites that will get you on your way:
Profounder.com: Get started by following their step-by-step process to outline your pitch. Now it’s time to get creative and develop your investment terms. Profounder then creates the legally compliant documents and an individual website for your venture. Now, you can share your idea with the world; seek pledges and meet your fundraising goal.
Kickstarter.com: While causes and charities are not welcomed, creative and genius project ideas are. Post your project, set your deadline and capitalize on your network. If you’re looking for a hybrid of e-commerce and patronage support where you won’t have to pay back funds – ever, then Kickstarter.com is the best place to kick-start your project into gear.
Rockethub.com: Come up with a fantastic idea and sign-up for an account at RocketHub.com. Post your new project by following their 5-step process. Offer tangible rewards and kickbacks instead of monetary incentives and fuel your project within a predetermined time limit. Share it with friends, family and associates and spread the good news.
To Learn More Click Here
Showing posts with label crowfunding. Show all posts
Showing posts with label crowfunding. Show all posts
Monday, February 7, 2011
Saturday, December 18, 2010
Crowdfunding: Business startups use tactic as alternative to investors
By: Marino Eccher, INFORUM
For three years, Minneapolis-based comic publisher Raighne Hogan paid to produce his company’s annual anthology of comics by local artists – the Good Minnesotan – out of his own pocket. That was getting pricey. So when it came time this year to put out the Good Minnesotan 4, Hogan tried a different tactic: passing around a digital collection plate to seek support from the public.
What is crowdfunding?
Crowdfunding is the latest trend for artists, startups and small businesses: raising money from the public via online pledge drives, a few dollars at a time. A handful of regional projects have used the tactic to jump-start their efforts, and one Fargo company is banking on it to launch a brewery.
For three years, Minneapolis-based comic publisher Raighne Hogan paid to produce his company’s annual anthology of comics by local artists – the Good Minnesotan – out of his own pocket.
That was getting pricey. So when it came time this year to put out the Good Minnesotan 4, Hogan tried a different tactic: passing around a digital collection plate to seek support from the public. It’s a tactic known as crowdfunding, and it has taken root among a handful of regional business projects in recent years.
Those range from small artistic ventures like Hogan’s, which sought and raised $1,000 over the summer from online backers, to ambitious business ideas like the Fargo Brewing Company, which will seek $55,000 in early 2011 to start what would be the state’s only homegrown brewery. They dangle perks, swag and goodwill to coax contributions out of friends, family and strangers in amounts ranging from $1 to $10,000-plus.
Crowdfunded projects are powered by websites that feature a wide range of projects for public consideration. Hogan used New York-based Kickstarter, which features a handful of other Minnesota projects, while the Fargo Brewing Company is using Los Angeles-based ProFounder.
The specifics vary from site to site, but the basic model stays the same: Users post a project with a funding goal and a time limit, typically a month, and solicit pledges from backers with a short pitch. Many Kickstarter projects also include videos. If the goal is met on time, the pledges are locked in and the site takes a few percentage points of the money raised as a fee. If not, no money changes hands.
To call such sites investment vehicles would be a misnomer: Backers don’t own a piece of the projects they support or turn a profit (indeed, any such arrangements would entangle the sites in considerable regulatory oversight). Support a successful ProFounder project, and you’ll do no better than break even; support a Kickstarter project, and you won’t get your money back at all.
To bring in backers without the prospect of financial gain, crowdfunding projects usually turn to creative incentives. A $500 Kickstarter donation to a Minnesota Fringe Festival play might get you dinner with the actors. A $100 investment in the Fargo Brewing Company will get you a company T-shirt; $1,000 will get you on the guest list of exclusive company events, including tastings.
Dana Mauriello, president and co-founder of ProFounder, said getting that kind of reward for investing in a company “is almost like being a member of a cool club.”
In ProFounder’s case, there’s also a philanthropic incentive to give. Backers are repaid with a percentage of the company’s revenue over a set number of years. Once they recoup their investment, any revenue that would have gone toward repaying them goes instead to a nonprofit of the company’s choosing for the duration of the agreement.
“You believe in the person, you believe in the business, you believe in the business mission, you just want to see this business exist in the world,” Mauriello said.
But getting a crowdfunded project to catch on amid a sea of other offerings isn’t easy. ProFounder, which launched in December, has dozens of projects, while Kickstarter has hundreds. Hogan said standing out on Kickstarter meant working aggressively to start his project. He started a blog and “bothered friends and family” throughout the process.
“A lot of it was just trying to create some noise on the Web,” he said.
It doesn’t always work. Rip Smith, a West Virginia-based photographer, tried to raise $3,500 via Kickstarter this summer for a photography project to document abandoned places in rural North Dakota. He secured just $432 in pledges.
Smith said he thinks his fundraising goal was too ambitious. He also said he never seemed to garner much momentum on Kickstarter – he was never highlighted on the home page or chosen as the featured project of the week.
“If I had to guess, success in that medium requires either someone who already has a large constituency to whom to appeal, or the project needs to capture people’s imagination in some way,” he said. Smith said he did the North Dakota project anyway, and might try crowdfunding again for future projects.
Jared Hardy, one of the partners in the Fargo Brewing Company, said the importance of building an engaged audience is one of the reasons the company decided to launch next year rather than this month. He said the brewery wanted to make sure it was on the radar before starting the clock on its lofty fundraising goal.
“We wanted to give them a little more notice ahead of time,” he said. The company is also seeking about $150,000 through a private round of investing – another area in which ProFounder will help start-ups navigate regulatory challenges.
The brewery is dangling a unique prize for high-rolling backers: Give $10,000 or more, and they’ll create a themed seasonal brew in your honor. But the real payoff, he says, is getting a beer company up and running.
“You actually get to help start it and be a part of that,” he said. “We think that’s pretty cool.”
To Learn More Click Here
For three years, Minneapolis-based comic publisher Raighne Hogan paid to produce his company’s annual anthology of comics by local artists – the Good Minnesotan – out of his own pocket. That was getting pricey. So when it came time this year to put out the Good Minnesotan 4, Hogan tried a different tactic: passing around a digital collection plate to seek support from the public.
What is crowdfunding?
Crowdfunding is the latest trend for artists, startups and small businesses: raising money from the public via online pledge drives, a few dollars at a time. A handful of regional projects have used the tactic to jump-start their efforts, and one Fargo company is banking on it to launch a brewery.
For three years, Minneapolis-based comic publisher Raighne Hogan paid to produce his company’s annual anthology of comics by local artists – the Good Minnesotan – out of his own pocket.
That was getting pricey. So when it came time this year to put out the Good Minnesotan 4, Hogan tried a different tactic: passing around a digital collection plate to seek support from the public. It’s a tactic known as crowdfunding, and it has taken root among a handful of regional business projects in recent years.
Those range from small artistic ventures like Hogan’s, which sought and raised $1,000 over the summer from online backers, to ambitious business ideas like the Fargo Brewing Company, which will seek $55,000 in early 2011 to start what would be the state’s only homegrown brewery. They dangle perks, swag and goodwill to coax contributions out of friends, family and strangers in amounts ranging from $1 to $10,000-plus.
Crowdfunded projects are powered by websites that feature a wide range of projects for public consideration. Hogan used New York-based Kickstarter, which features a handful of other Minnesota projects, while the Fargo Brewing Company is using Los Angeles-based ProFounder.
The specifics vary from site to site, but the basic model stays the same: Users post a project with a funding goal and a time limit, typically a month, and solicit pledges from backers with a short pitch. Many Kickstarter projects also include videos. If the goal is met on time, the pledges are locked in and the site takes a few percentage points of the money raised as a fee. If not, no money changes hands.
To call such sites investment vehicles would be a misnomer: Backers don’t own a piece of the projects they support or turn a profit (indeed, any such arrangements would entangle the sites in considerable regulatory oversight). Support a successful ProFounder project, and you’ll do no better than break even; support a Kickstarter project, and you won’t get your money back at all.
To bring in backers without the prospect of financial gain, crowdfunding projects usually turn to creative incentives. A $500 Kickstarter donation to a Minnesota Fringe Festival play might get you dinner with the actors. A $100 investment in the Fargo Brewing Company will get you a company T-shirt; $1,000 will get you on the guest list of exclusive company events, including tastings.
Dana Mauriello, president and co-founder of ProFounder, said getting that kind of reward for investing in a company “is almost like being a member of a cool club.”
In ProFounder’s case, there’s also a philanthropic incentive to give. Backers are repaid with a percentage of the company’s revenue over a set number of years. Once they recoup their investment, any revenue that would have gone toward repaying them goes instead to a nonprofit of the company’s choosing for the duration of the agreement.
“You believe in the person, you believe in the business, you believe in the business mission, you just want to see this business exist in the world,” Mauriello said.
But getting a crowdfunded project to catch on amid a sea of other offerings isn’t easy. ProFounder, which launched in December, has dozens of projects, while Kickstarter has hundreds. Hogan said standing out on Kickstarter meant working aggressively to start his project. He started a blog and “bothered friends and family” throughout the process.
“A lot of it was just trying to create some noise on the Web,” he said.
It doesn’t always work. Rip Smith, a West Virginia-based photographer, tried to raise $3,500 via Kickstarter this summer for a photography project to document abandoned places in rural North Dakota. He secured just $432 in pledges.
Smith said he thinks his fundraising goal was too ambitious. He also said he never seemed to garner much momentum on Kickstarter – he was never highlighted on the home page or chosen as the featured project of the week.
“If I had to guess, success in that medium requires either someone who already has a large constituency to whom to appeal, or the project needs to capture people’s imagination in some way,” he said. Smith said he did the North Dakota project anyway, and might try crowdfunding again for future projects.
Jared Hardy, one of the partners in the Fargo Brewing Company, said the importance of building an engaged audience is one of the reasons the company decided to launch next year rather than this month. He said the brewery wanted to make sure it was on the radar before starting the clock on its lofty fundraising goal.
“We wanted to give them a little more notice ahead of time,” he said. The company is also seeking about $150,000 through a private round of investing – another area in which ProFounder will help start-ups navigate regulatory challenges.
The brewery is dangling a unique prize for high-rolling backers: Give $10,000 or more, and they’ll create a themed seasonal brew in your honor. But the real payoff, he says, is getting a beer company up and running.
“You actually get to help start it and be a part of that,” he said. “We think that’s pretty cool.”
To Learn More Click Here
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