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Crowdfunding as a Business Startup Method

document Crowdfunding, Distributed Knowledge

Crowdfunding as a Business Startup Method
There are an infinite number of ways one can start a business. There also seems to be an infinite number of things that can go wrong during the business startup phase. Fortunately, there are also many ways to fund a startup. One method you may not have considered is crowdfunding. Crowdfunding has its roots in charity work, and indeed works similar to a public television pledge drive. You put out a certain amount you want to raise for your business and family, friends and acquaintances pledge as much or as little as they want until the goal is reached. This differs from using an angel investor or microloan because your funding comes from several different sources. In the 1990s, the British rock group Marillion used crowdfunding techniques to underwrite a tour of the United States. The group has also used crowdfunding to record and distribute its albums. The technique has also been successfully employed in the film industry as reported by Time in 2008. As recently featured in Inc. magazine, the crowdfunding site Kickstarter.com allows entrepreneurs to network and reach their startup funding goals. Kickstarter is designed for short term fundraising for single projects as opposed to long range planning, so keep that in mind if you decide to use it. Kickstarter employs several rules for any potential investment projects. All projects must be preapproved by the site and your fundraising goals must be met before any funding occurs. As with crowdfunding in general, the site works best if you already have a large social network. Other crowdfunding sites you may want to explore include IndieGoGo.com, ProFounder.com and Peerbackers.com. While crowdfunding to date has concentrated on small amounts, usually under $10,000, the Wall Street Journal recently reported this may be changing. Bo Fishback, vice president of entrepreneurship at the Kansas City-based Ewing Marion Kauffman Foundation, believes the market is “at the beginning of a huge crowdfunding movement that will disrupt the traditional channels for funding.” This is due mainly to continued tight credit markets and the allure of raising small amounts from ordinary people rather than, in Fishback’s words, “trying to say the right things to get a rich guy to cut a check.” Indeed, crowdfunding takes a lot of pressure off an entrepreneur looking to fund his or business as it negates the need to convince one or a small group of investors in favor of approval from the masses. That way, if one can’t adequately address the three questions venture capitalists want answered, one can still pursue his or her dream. A significant disadvantage to crowdfunding is that it’s all too easy to run afoul of securities regulations regarding investments, specifically requirements that any investment opportunity must be registered. Because of this, it’s a good idea to retain legal counsel to make sure you’re not breaking any securities laws and regulations. Regardless of how one funds his or her startup, it is a good idea to keep as much of that revenue in house as possible. One way to accomplish that is to minimize credit card processing fees. Here at FeeFighters, we can help you accomplish exactly that. (Run an auction and save 40% on credit card processing in minutes).

Summary One of the major setbacks that entrepreneurs encounter is the lack of funds to take their business plans forward. In some instances, it is not due to the lack of financial sources to give them the necessary boost, but the lack of options that they have. This, however, is not an issue with crowdfunding thanks to the numerous options that are open to anyone that wants to take their business forward.

Description Crowdfunding has become a business funding alternative that is and will continue to attract many entrepreneurs. This is due to the flexibility that is guarantees and the numerous funding possibilities that are open to projects. Instead of working with a large lump some, project creators can rely on the small contributions from various people to reach the final goal.

Tags: Crowdfunding, IndieGoGO, Kickstarter, Peerbackers

Posted by Ruth Baxter

Mar 07, 2011 01:57 pm GMT Viewed 2693 times

Author: W. Lane Startin Source

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