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

The American Dream Machine

By Carl Weiss

One of the many things that has  made our country great is  its dreamers, tinkerers and inventors.  The Internet itself is proof positive of the power of the American Dream.  There are millions of people with great ideas for new businesses, products or services. The one reality many share is that there’s a big difference between drawing an idea on a napkin versus actually bringing your concept to fruition.  This week we’ll discuss six key ways that the Internet can help you achieve the American Dream without breaking the bank.  

People tend to forget that the Internet as we know it is not quite 20-years old. In fact, back in 1994, 

there were only around 10,000 websites.  Fast forward to 2014:  more than 130,000 websites will be launched … and that’s just today.  This gives you an idea of the exponential online growth that has occurred in the past decade.  Many of the sites that currently grace the Internet are business-related, making the World Wide Web the ultimate destination for established businesses and start-ups alike.  But what’s even more incredible is when it comes to either boot strapping or building a business, there’s no single entity on the planet that’s more useful than the Internet.  Allow me to count the ways:

1.      Funding a Business   – Back in ’94, there were only a few methods most entrepreneurs could use to find the financial backing to get a new venture going.  They either dipped into their own savings, borrowed from friends or family, or dug a hole in their credit cards and prayed they could get their investment back before interest rates ate them alive. (Take it from me, since I self-funded my first Internet business. This latter method is not for the faint of heart.)

Today’s tinkerers, dreamers and entrepreneurs can secure startup funding at the click of a mouse by  looking at crowdfunding websites such as Kickstarter, Indiegogo and RocketHub, among others.  The best part about these sites is they not only offer to help you start your business, but they do so without requiring you to give up any equity in your firm, or in some cases, even require you to pay back the investors. What a deal!

This form of funding has become so popular that there are now books and online video tutorials that show you, step-by-step, how to get crowdfunding to work for you.  An article by “Entrepreneur Magazine” entitled, “10 Top Crowdfunding Websites,” details the variety and scope of the industry.

In her book Cash From the Crowd, Sally Outlaw, founder and CEO of crowdfunding website peerbackers, reveals the secrets of funding your business with help from colleagues, peers, family, friends and even perfect strangers through a crowdfunding campaign. 

http://www.entrepreneur.com/article/228534#

2.     Starting a Business – Before the advent of the Internet, there were really only two viable business models from which to choose: Brick & Mortar or Mail Order.  Both of these models were expensive to instigate, own and operate. The Brick & Mortar model necessitated scouting a location, site build out, purchasing inventory, furnishing and stocking the shelves, etc.  And all of which could take months, not to mention tens of thousands of dollars, to accomplish.  Keep in mind all of this had to occur before you opened your doors for business.  Even today, this is a high-risk way to go into business.

The Mail-order model, while eliminating the overhead associated with a Brick & Mortar, wasn’t without its own perils.  Back then, this business model required an entrepreneur to purchase and warehouse inventory, and then print and snail mail tens or even hundreds of thousands of catalogs in the hopes of generating sales. While some businesses today still use this model, more and more mail order ventures rely on the Internet to showcase their wares and process orders electronically.  This not only saves time and money, but it saves a whole lot of trees as well.

3.      Promoting a Business  – In ’94 there were three primary methods to promote your venture: Print, Radio and TV.  None of these models were particularly user- friendly or cheap.  Usually, in most towns, there was only a single newspaper and a handful of broadcast stations. This gave the owners of the newspapers, magazines, radio and TV stations the ability to charge whatever the market would bear, thus pricing many would-be entrepreneurs out of the market before they could even get off the ground. 

Then along came the Internet and sites such as Craigslist, eBay and YouTube were born that gave startups a whole new lease on life.  Not only have these portals become a success, they’ve become so successful that they actually threaten the viability of their more traditional counterparts.  (Craigslist has been cited as one of the prime reasons the newspaper industry has been in sharp decline, since the site offers classified advertising at low or even no cost.)

For small businesses, the advent of these and other websites have not only meant the difference between life and death, it means entrepreneurs now have a way to cost-effectively test and refine their business models.  With the availability of blogs, social networking, podcasting and video portals, which offer much of the same things as traditional print and broadcasting venues — only for free — now small businesses have a much better chance of creating a sustainable revenue since promotional expenses are much less than they were 20 years ago.

4.      Staffing a Business  – Hiring personnel is still something that causes many business owners to wake up in a cold sweat in the dead of night.  The costs associated with hiring, training, supporting and creating/equipping workstations for employees can be a daunting task for any business, let alone a startup with limited resources.  Back in ’94, with the exception of temps, there was little a business owner could do to contain the costs associated with hiring new employees.  Then along came outsourcing and the world became a business owner’s oyster.  Today, most businesses take advantage to outsource many tasks, from HR, to customer service, to IT, to clerical services, to bookkeeping, and even editorial functions. 

In a recent article from “Business Week” entitled “The Future of Outsourcing,” the practice of outsourcing jobs offshore has become a political hot potato since it is seen as big business’ way of eliminating high paying jobs that would otherwise be given to Americans. However, when it comes to small businesses, their consensus is quite different:

Thus entrepreneurs see a chance to turn around dying businesses, speed up their pace of innovation, or fund development projects that otherwise would have been unaffordable. More aggressive outsourcers are aiming to create radical business models that can give them an edge and change the game in their industries. 

http://www.businessweek.com/stories/2006-01-29/the-future-of-outsourcing

Love it or hate it, outsourcing is a resource most small businesses could little afford to do without today. Besides, in our current business environment, it isn’t always necessary to take your outsourcing needs offshore.  In our current business, we use a number of US-based independent contractors for everything from web design, to writing and editorial tasks, to on-screen talent and more.  It’s been my experience that employing outsourced labor in the short term results in hiring a qualified full-time employee down the road. In many cases, this can mean hiring the same person that was employed as an indie. (Think of his/her outsourcing tenure as an “audition.”) Even better, it allows business owners the flexibility of generating occasional jobs for hire that can add to the bottom line without threatening the business’ viability.

5.      Sustaining a Business – Once you’ve started a business, you need to find a way to sustain and grow it. This meant the Small Business Administration (SBA) back in ’94.  While the SBA is still one resource that can be called upon to help fledgling businesses, it’s by no means the only one.  Today there are thousands of entities that are but a point-and-click away, which offer everything from business coaching, to business networking, to online marketing and more. 

There comes a time in every growing business when, as the owner, you "come to the end of your sleeve." Your business reaches capacity. Either your business has surpassed your skill set or your capacity, or both. 

http://www.huffingtonpost.com/jackie-nagel/are-service-providers-slo_b_5326132.html

What happens when you realize you’ve taken your business to the point where your acumen is no longer sufficient to take it to the next level? It used to mean incurring the expense of hiring high-priced consultants or employees that were a drain on the business.  Today, that’s no longer an issue, since there are a number of business assets online that can provide the knowledge you seek. Or you can acquire outsourced technical experts on a per-hour or per-project basis.

6.     Selling a Business – The best reason to own a business is to be able to sell the business down the road.  In the past, this meant hiring a business broker and paying a percentage of the sale price to a third party.  While I’m not saying business brokers don’t have their place when it comes to selling a business, they’re no longer the only way to go.  Just as the real estate industry has spawned a For Sale By Owner (FSBO) craze, there are a number of web portals that have sprung up whose primary task is to help business owners sell their firms.

Many business owners looking to sell their business don't realize they can use the internet to make the selling process go more smoothly. Online business-for-sale marketplaces allow sellers to reach a large number of potential buyers and provide resources for owners considering putting their business up for sale.

http://www.entrepreneur.com/article/186692

Sporting names such as bizbuysell.com, BizQuest.com, businessforsale.com, globalbx.com and sellingyourbusiness.com, these sites can help you price, position, and sell your business, since they cater to business owners and buyers galore.  More importantly, even if you do end up dealing with a broker to sell your business, you’ll be a much savvier seller who better understands the process. That’s money in the bank.

The bottom line is that when it comes to starting, funding, promoting, staffing, sustaining or selling a business, the Internet is the American dream Machine.

Carl Weiss is CEO of Working the Web to Win, a digital marketing agency in Jacksonville, Florida.  You can interface with Carl every Tuesday at 4 p.m. Eastern when he airs his radio show on Blog Talk Radio.