Can Crowdfunding Kickstart Your Business?

By Carl Weiss

Many people have used crowdfunding sites to jumpstart new businesses or take existing businesses to the next level.  With a proliferation of crowdfunding sites such as Kickstarter, IndieGoGo, RocketHub and more, these sites have given a number of entrepreneurs the chance to fund a pet project or business that would have otherwise languished.  

Let’s face it, banks are not exactly throwing their cash around these days.  Friends and family cannot always be relied upon to have the wherewithal to back your dream. Credit cards while another opportunity for self-funding is fraught with many risks, especially since the credit card companies draconian policies can suddenly ramp up your interest rate to twenty five percent or more.  This is one of the prime reasons that crowdfunding is got its start.

Is Crowdfunding Music to Your Ears?

While most people think the phenomenon of crowdfunding is an invention of the 21st century, its roots can actually be traced back some four hundred years to a time when many publications were sold by subscription before the first copy came off the presses.  However the trend to branch out to other business models is indeed a recent development.  While there is some conjecture as to which website was the first to offer crowdfunding, Wikipedia lists ArtistShare which started in 2003.  Slanted toward the recording industry, the site was designed to allow recording artists to raise funding from fans in order to expedite the expensive process of bringing out a new album.  (Imagine how Mozart would have jumped at the opportunity in the 1770’s to have thrown off the yolk of the church and embraced crowdfunding in order to have artistic control of his career.)

By 2006, there were three more hats in the crowdfunding ring: EquityNet, Pledgie and Sellaband. While Sellaband was another CF brand devoted to the fan funding of recording artists, EquityNet and Pledgie were something else altogether.  Founded in 2005, Equity Net was designed to help startups and existing businesses raise equity capital from accredited investors.  Used by more than 10,000 entrepreneurs, EquityNet provides access to 20,000 individual investors, including angel investors.  To date it has helped companies raise more than $200 million.  Pledgie.com was the first site to take crowdfunding to a whole new level by allowing a broad spectrum of entrepreneurs, artists, philanthropic causes and others to use the Internet to fund their project s.  Created in 2007 by Mark Daggett and Garry Dolley, the site permits anyone the opportunity to pitch their project in order to solicit donations.  (The site has a list of 50 categories under which to solicit funds.)

However, it wasn’t until 2008/2009 that crowdfunding hit the big time with the introduction of such sites as IndieGoGo, KickStarter, and RocketHub.  Whether it was a combination of savvy marketing or just being in the right place at the right time, these three platforms definitely made their mark by raising funds in a big way.  To date Kickstarter is the current BMOI –Big Moneymaker on the Internet, having raised more than $10 million for smartwatch startup Pebble alone, along with a number of other multi-million dollar funded projects. For a list of the top-10 Kickstarter projects go to http://www.bornrich.com/top-10-kickstarter-campaigns-raised-money.html?view=all

Not to be outdone, IndieGoGo raised more than $2 million apiece this past year for the independent films Lazer Team and Gosnell the Movie.  They also raised more than a million dollars for a video series called Tabletop Season 3 that is all about tabletop games.     To see more go to: http://www.crowdfundinsider.com/2014/09/50149-crowdfunding-best-top-10-successfully-funded-kickstarter-indiegogo-films/

Then there’s RocketHub.com.  While not yet as well-known as Kickstarter or IndieGoGo, this crowdfunding platform begun in January of 2010.  Just like Kickstarter and IndieGoGo, on RocketHub you get to pitch your project, select a funding goal and choose a deadline by which to raise funds.  The chief difference with RocketHub is that if you do not reach your stated goal you get to keep the funds raised minus 12%. (8% fee charged for unsuccessful projects + a 4% transaction fee.)  With both Kickstarter and IndieGoGo you need to achieve or exceed your strike number in order to collect your prize.

Of course, there are other crowdfunding sites that have joined the fray as well, such as FundRazr, Fundly, GoFundMe, Microventures, FundaGeek, Peerbackers and more.  Each of these platforms have their rules and regulations, fees and disclaimers.  Before selecting a platform you need to read the rules and regulations thoroughly.  However, even this doesn’t mean you will be accepted, much less successfully funded.  The bad news is that if you are rejected, it is difficult if not impossible to find out why or what you need to do to meet a site’s criteria since most of the crowdfunding sites do not have a customer service number, chatroom or email address to which funding hopefuls can respond. The good news is that with all the CF sites out there, just because you crash and burn on one doesn’t mean you will flameout on another.  (It’s all part of the learning curve.)

Also, recent changes to the rules at Kickstarter have opened the doors for projects that would have previously been turned down out of hand.  Take for instance Zack Brown, the Potato Salad Guy.  His proposal that sought to raise $10 to make potato salad instead raised $55,492 when it went viral.  (Talk about supersizing your order.)  Not only didn’t Zack’s project have any definitive objectives, once he raised $55k he wound up hiring a bunch of lunch trucks to throw a potato salad party with his windfall.  (He deemed the event PotatoStock.) Check out Zack’s project at: https://www.kickstarter.com/projects/324283889/potato-salad/comments

Go Fund Yourself

I know what you’re thinking… How do I get some of that salad, the green kind?  The first thing you have to do is decide on which type of crowdfunding model fits your needs best.  That’s right, this is not a one-size-fits-all industry.  Currently there are three flavors from which to choose:

1. Reward-Based Funding – Just as the name implies, while this model does not require you to give up points or pay back funds raised in this way, you do need to provide something of value (real or intangible) in order to use this model.  Rewards could be anything from having your name written on the closing credit roll to books, t-shirts and/or real merchandise being created for the funds raised.
2. Equity-Based Funding – As the term implies in this funding model you are required to give up a percentage of the business or points in a movie.  
3. Credit-Based Funding – This third model can provide funds that are paid back just as you would a loan.  This form of funding also encompasses micro-loans which is another form of crowdfunding that has reached a worldwide audience.

Which Platform is Right for You?

When it comes to selecting the best platform that fits your needs, the first thing you need to do is search the CF site for current and previously funded projects.  See how closely they conform to your proposed project.  Look for failed as well as successful projects and try to determine what went wrong.  Then write up a proposal which while not plagiarizing that of a successfully funded campaign closely emulates its format. (Even this does not mean that the project will be given a green light.  It just makes the odds of acceptance better.)

Then comes the fun part; creating your presentation.  This should include visual elements such as one or more videos, photos of your finished product or prototype, photos of you and your team and so on.  The better you convey the excitement and timeliness of your project from concept to completion the better the chance it will resonate with those considering funding it.  In fact, it is this last part of the process that is the most important to successfully raise funds: your audience.

While major CF sites have anywhere from hundreds of thousands to millions of viewers that doesn’t mean that each and every one of them is going to see your proposal.  So if your idea to raise funds is to set it and forget it you could be in for a rude awakening.  Since most projects are restricted to a 30-60 day term in which to raise funds, the onus is on you to get the ball rolling fast and early.  This means that not only do you need to write your proposal, shoot videos and photos, but you also need to start networking as soon as the project goes live.

This boils down to having your troops in place to hit the beaches and start fanning the flames.  Through the use of social nets, email blasts, text messaging, phone calls as well as up-close-and-personal grassroots in your face meetings you need to get your friends, family, coworkers and anyone else you can convince to not only buy into your project, but get their friends, family and coworkers to do the same.  The beauty of the CF community is that if you can get the ball rolling then many times the crowd and sometimes the owners of the funding site will rally around your cause.  If on the other hand you think you can simply plug your project in and walk away you are going to be disappointed.

However, as I mentioned earlier in this blog, just because you crash and burn doesn’t mean that your hopes to raise funds are over.  Lick your wounds, learn from your mistakes and try another CF platform to toot your horn.  Who knows, maybe you too can use crowdfunding to kick start your business.

Carl Weiss is president of Working the Web to Win, an award-winning digital marketing agency based in Jacksonville, Florida.  You can listen to Carl live every Tuesday at 4 p.m. Eastern on BlogTalkRadio

Can Dirty Tricks Deep Six Your Business?

By Carl Weiss

There was a time not long ago when the search engines began cracking down on what were termed Black Hat SEO Techniques.  Tactics such as keyword stuffing, serial websites, and link farms, just to name a few, were deemed verboten by every search engine on the planet.  The reasons why were obvious: If you could cheat them to beat them, there was no way that search engine operators could guarantee the validity of their searches.  Back in the early days of the Internet, there was little that the search engines could do to curb this trend since their spiders were not savvy enough to understand what it is they were reading.  However, this is no longer the case.  What this means is if you either knowingly or unknowingly hire a practitioner of black hat SEO, you could find your site sandboxed or even de-listed.  As a result, you need to take care when entrusting your online business assets to a third party.

The good news is that Black Hat SEO firms are a dying breed.  The bad news is that a number of former black hatters have retooled their heinous skills in order to turn a profit.  What I am referring to is the growing danger of online dirty tricks, where an unscrupulous business owner willingly pays to have a competitor’s reputation besmirched or even to cause overt damage to their web presence in such a way that it becomes difficult or even impossible to do business on or offline.

Here’s how it works:

1.      What’s In a Name? – Everyone knows how online reputation sites have changed the way in which we do business. Whereas in years past a shoddy business could operate with impunity, today the first place that a disgruntled customer will go are to sites like Google Local, Yelp, Angie’s List, Ripoff Report or other reputation sites to lodge a complaint.  While a boon to consumers, many of these sites allow people to post complaints anonymously.  This opens up the doors for underhanded competitors to post fabricated complaints against a competing business in order to damage the competition.  Worse still: a number of these complaint mills offer no way for a business to address or reverse a complaint. This means that once posted, it’s is nearly impossible to seek redress.

2.      Yellow Press Express – Another way to damage a company’s reputation is by publishing inflammatory blogs, newsfeeds and press releases about a competitor.  Sound far-fetched?  Back in May of 2011, ABC News reported that Facebook admitted hiring a major public relations firm to pitch anti-Google stories to news outlets across the U.S.  The blog went onto elaborate the fact that a cottage industry of sorts has sprung up where writers are paid to write comments on review sites that either boost a given business or criticize it. http://abcnewsradioonline.com/business-news/nasty-competition-fuels-dirty-business-tricks.html

3.      The Hack Attack is Back – Hackers can also be employed by a competitor to do everything from launch Denial of Service attacks on your website, to attempting overt industrial espionage.  Several businesses were even damaged by hackers when they subverted ownership of a company’s social sites or even closed or deleted a company’s social site or blog.  Wresting control of another person’s online asset is surprisingly simple.  Even if that fails, it is child’s play to create a social site or website that spoofs a competitor’s, thereby giving the hacker carte blanche to post all sorts of slanderous material.  Just like identity theft, if this should happen to your business, it could take months sort out the mess this creates. Since these tricksters can be located anywhere in the world, trying to seek redress for any damage done can prove to be all but impossible. (See our previous blog, “The Hack Attack is Back.”)

4.      Fraud Free For All – Another way that competitors can strike is by making fraudulent purchases.  In a recent CNN Wire report, Uber, a San Francisco ride-sharing service was accused by competitor, Lyft, of having its employees order and cancel some 5,000 rides since last October.  The article goes onto say: “Lyft claims 177 Uber employees around the country have booked and canceled rides in that time frame. Bogus requests decrease Lyft drivers’ availability, which could send users to Uber instead. But it’s not just the company that suffers. Canceled rides jeopardize income that Lyft drivers depend on — plus they spend time and gas money en route to passengers who have no intention of taking a ride. And even when Uber employees don’t cancel, Lyft drivers complain to headquarters that they take short, low-profit rides largely devoted to luring them to work for Uber.  Lyft claims to have cross-referenced the phone numbers associated with known Uber recruiters with those attached to accounts that have canceled rides. They found, all told, 5,560 phantom requests since October 3, 2013.” While the article goes onto state that there was nothing to suggest that Uber’s corporate office commissioned or sanctioned the canceled rides, it states there is the potential for a competitor to create havoc in a company by the use of such a tactics.  http://kdvr.com/2014/08/11/uber-accused-of-dirty-tricks-to-damage-competitors-business/

5.      The Ultimate Inside Job – If you have ever wandered inside a casino then you know that they are awash with security cameras that record everything from the players and dealers on the gaming floor to game supervisors and security guards that handle either chips or cash.  Unfortunately, most small businesses do not have access to this kind of technology.  As a result, this leaves the doors open for a competitor to have one of his or her minions infiltrate your business.  As the old saying goes, “It’s hard to find good help.” However, for underhanded competitors it’s oh-so-easy to find bad help by hiring a saboteur that is paid to join your ranks.  Once inside a company, the damage that can be done by an interloper is incalculable.  Everything from client lists, to suppliers, and even in some cases social security numbers can be purloined by a wily competitor.  Armed with the keys to the vault as it were, this kind of access can not only harm a company’s bottom line, it can destroy in from within.  Also, if a hacker wants to gain access to a server, there is no easier way than being able to plug an external thumb drive into a system.  If that wasn’t bad enough, Amazon even carries a book in its listings entitled, “How to Steal Your Boss’s Job.”  Talk about an inside job!

When it comes to doing business, competition isn’t necessarily a bad thing.  It’s been known to spur innovation and force an industry to tighten its belt, which in many cases improves prices for consumers. (Remember when laptops used to retail for $2,500?)  However, if a competitor decides to go to the dark side and employ dirty tricks, the only numbers you’re likely to see could be the Deep Six.

Carl Weiss is president of Working the Web to Win, an award-winning digital marketing agency based in Jacksonville, Florida.  You can listen to Carl live every Tuesday at 4 p.m. Eastern on BlogTalkRadio