August 2, 2016
Countless people dream of starting a business. And as many people know, one of the greatest obstacles to that goal raising enough capital to make that dream a reality. While most of them have viable business ideas that can lead to significant achievements, very few financial institutions are ready to fund new entities. Startup venture capital remains inaccessible to the average citizen while established entrepreneurs have more than they can handle. Fortunately, with the advent of crowdfunding, aspiring entrepreneurs have new hope in alleviating the challenges of finding funding.
Crowdfunding has been gaining popularity over the last few years as an excellent way of funding new and promising ventures by utilizing the power of social networking. If you are new to this concept, crowdfunding is a method of gathering resources especially finances in support of a project or business. It involves appealing to an informal network of friends, relatives and other like-minded individuals for small financial contributions. Although you can initiate crowdfunding offline, the internet presents a better way of doing it.
Recently, new crowdfunding online platforms are coming up every day. Unfortunately, if you consider most of the business ideas seeking to fund, you are likely to realize that most of them are not close to their funding objectives. Even though crowdfunding has a great potential to democratize startup capital and increase chances of success, effective planning is necessary as with all other fundraising activities.
Choose the Platform Wisely
Some platforms will certainly increase your chances of success. Since most people are new to this innovative concept, they’re trying to learn through practice, which means you will find a number of mediocre websites.
It is crucial to select a site that complies with relevant regulations. Most of the compliant sites recommend raising funds from family members, friends or individuals with whom you have significant knowledge or pre-existing relationship.
Your success will depend on your ability to come up with a convincing argument. That means you should take the time to craft a great pitch. It is evident that most fundraising ideas fail because they’re too vague. The concept comes across as a desperate request for assistance rather than a viable investment opportunity.
Even if you are seeking a small amount of money to launch a startup, you should come up with a business plan that includes marketing strategies and financial projections.
Set Realistic Goals
Typically, crowdfunding requires you to set a specific amount of money that you need for your business. If you fail to meet the minimum amount, you will have to return the partial amount to the investors. You should, therefore, set realistic funding goals so that you can hit them easily. It’s always better to meet low expectations than fail to match big ones.
Photo: Flickr / 401(K) 2012
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