Whether you’re doing a non-equity crowdfunding raise on Indiegogo or Kickstarter, or are planning an equity-based raise once the SEC finally puts the rules in place, there are a few mistakes that I see frequently. Just a casual run through Indiegogo or Kickstarter will show you a great disparity. Some projects seem to accumulate great support from the beginning, while others languish. And it’s not always because of the idea’s merit. There are plenty of good ideas that never get a single supporter–and plenty of mediocre requests that get thousands of dollars.
How to Crowdfund
Crowdfunding advantages go far beyond money
Much of the excitement around crowdfunding is understandably the fact that small businesses with no access to lines of credit (which is most of us), will now have a shot at raising much-needed funds for start-up or expansion. And yes, it all starts with money, but it doesn’t end there. The most successful entrepreneurs going down the crowdfunding path will use their crowds in more ways than one.
What do you need to begin crowdfunding?
Take a look through popular non-equity crowdfunding sites like Indiegogo and Kickstarter, and you’ll notice that the majority of listings are nothing more than basic requests, ideas that have not yet been implemented, and a lot of hope against hope that somebody will notice. To be sure, sometimes they do, and for reasons that are often hard to explain. Take the guy who put up a crowdfunding listing, explaining that he wanted people to give him money enough to buy 50 lunches. No explanation as to why, no social benefit, nothing–and he actually is getting money. I can’t explain it. And then there’s the bus driver who got picked on by junior high school students and received over half a million dollars just out of sympathy. But, those are anomalies.
How crowdfunding opens a door for small business
Some of the nay-sayers who are disparaging the idea of crowdfunding are making the same tired old recommendations: Go to the Small Business Administration. Go see your banker and get a loan. Apply for venture capital or get an angel investor, or start out with your “friends and family” round of funding.
Why should venture capitalists care about crowdfunding?
Venture capitalists achieve remarkable success not just because they sit on a large war chest of cash. They achieve success because they’re ahead of the curve. They know what’s coming next.
There has been some considerable debate on whether crowdfunding will change the game for venture capitalists, cause them worry, or eliminate them completely. Not to worry, all you VCs out on Sand Hill. Your position is safe, and in fact, it has never been better.