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Principles of Capital Development: Crowdfunding

Seeking Capital

Avoiding Under-capitalization

Under capitalization often causes businesses to fail before they ever get started. Publishing a book, working as a freelancer, starting a small commercial kitchen, all of these require a certain amount of capital.

We will be looking at several different forms of capital development in this series of posts as you can see below.

Crowd funding is an effective method to pay for your small business’s startup needs, one that was not available in the same manner 25 years ago. 

Loans

The highest risk and least recommended way to start a business, loans are sometimes necessary to start a small business.

You can do SBA, traditional, or personal loans.

Cash Flow

If you can start a small business by cash-flowing it,  do it! 

Cash is king, and letting your business pay for itself provides the best ROI for the least amount of risk.

Equity

Depending on your business needs, you may be able to sell part ownership in the company to raise funds.

Care needs to be taken: its a relationship not just business.

Definitions

Crowd-funding is where you use the power of the internet to raise money from a large group of people. 

A crowdfunding platform is a website that you can use to market your project,  to accept payments, and to start building your customer relationship management system. 

Different Platforms

Some crowd-funding platforms, like Go-Fund-Me, offer a platform for soliciting donations. For educational startups and other ministries, this type of platform can be a very good way to raise money to start your business. Other platforms, like Kickstarter, give you the option to basically pre-sell your project, service, or product. Then other platforms, like Patreon, allow you to combine cash-flowing and crowdfunding your business through an online revenue stream. 

 What does it take to run a successful campaign?

To start a campaign, you need to know your audience. Like all marketing success, you must be able to communicate effectively to your specific audience. In crowd-funding, we must answer the following questions:

Who is going to support this campaign?

Why will they support it?

Why will they share it?

Answer these questions and you will be close to crafting a buzz campaign for your crowdfunding. 

Then you need to consider whether you are going to sell something to start your business, ask for help as a charity, or do equity crowdfunding. 

When you have answered these questions, you are ready to pick a platform and start fundraising. 

 

Mistakes to Avoid

Keeping Your Project Secret

It can be scary to tell people about your project. You might be afraid that they will take it and start their own business to compete with you. 

Don’t be afraid. 

To crowdfund you need to tell people about your project. You need to talk to them. Get your project in front of local reporters. 

Talk about your project to business leaders. 

Crowdfunding doesn’t work without a crowd.  

Picking the Wrong Platform

If you are doing a small project with local interest, a project like GoFundMe might work. But if you want to offer people something in exchange for their support (like selling a book), you need to use a different platform. 

Research your platform to make certain that you use the right platform.  

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Further Questions

Ask Me Anything

If you have further questions regarding crowdfunding, or want help to select a platform, please reach out.