There are many ways to obtain funding for your company that might seem risky or strange to you, but that are really becoming new standards of practice in the modern world of business. One of the most popular ways of getting the financing you need is known as “crowdfunding.”
Crowdfunding is when a group of people pools money and resources together, usually via the Internet, to support efforts initiated by other investor groups. Unlike other investments, in which an investor takes a large stake in a small business, with crowdfunding, you can attract a “crowd” of people — each of whom takes a small stake in a business idea by contributing towards a funding target. This spreads the risk among backers and creates a network of support for your business.
There are a few guidelines, though. Large crowdfunding investments are limited to SEC-accredited investors. Currently, the amount a un-accredited investor can invest is capped at 5-10 percent of your income. One key to getting what you want from crowdfunding is having a careful strategy and a great business plan. Start by perfecting your sales pitch. Keep it simple. If your pitch doesn’t excite your target investors, then crowdfunding may not be for you.
Next, you want to make it easy for prospective investors to connect with your idea. Create and maintain momentum by being responsive; take calls, answer emails, and use social media or an email list to help you meet your target.
In these tough economic times, crowdfunding has become a popular and alternative method of raising money for a business, real estate investments, or projects and has become popular because of successful online sites such as Kickstarter, Wefunder, Crowdfunder and RockthePost.
Learn more about crowdfunding, SBA loans and other forms of funding by accessing our in-depth Wise Learning Series Business Basics guides today!