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Is Crowdfunding Right For Your Business

May 9, 2019

 

Crowdfunding might work for you in the early stages of gathering funds and has become a popular way to fund new ideas.  Crowdfunding might be right for you at the initial or "seed" funding stage of your business.

 

 

 

Indiegogo, Kickstarter, and GoFundMe are just a few of the crowd funding platforms you can work with

 

Crowdfunding presents minimal risk with as you might find several or perhaps hundreds of potential investors making small contributions that can help you get started with little risk. Well-run campaigns can net thousands of dollars.

 

Crowdfunding harnesses the power of the Internet to fuel innovation at the beginning of the business life-cycle. While crowd-sourcing capital can only be done at the start, it is very useful to getting a startup off the ground.

 

Disadvantages: Before launching operations, owners can be indebted to a large number of unsophisticated investors, which can negatively impact future investment opportunities down the road.

 

While there are many crowd funding websites and even a directory of crowdfunding platforms here is a summary of the top sites for launching a business using this approach.

 

Indiegogo is becoming known for financing personal and cause-related campaigns, which raised over $700,000. It accepts all projects without review. According to its website, "Our platform is available to anyone, anywhere, to raise money for anything." While its success fee at 4 percent is 1 percent lower than most websites (which charge 5 percent), it does charge one of the highest fees in the industry -- 9 percent -- if you don't meet your goal.

Kickstarter. While Kickstarter can't be used to fund businesses per se, it does accept products and has had some remarkably successful campaigns, including about 50 that have generated over a million dollars in funding. Kickstarter "curates" its projects, meaning it has a rigorous submission process.

 

Peerbackers focuses on funding entrepreneurs and innovators. The platform has expanded to include young entrepreneurs ages 13 to 17 through partnerships with student organizations. Peerbackers also launched Crowdfunding Academy to offer education and support to those who want to crowd fund.

 

Equity Investment

The backers at websites like MicroVentures are accredited investors and not "crowds" of everyday Americans, so these platforms might not fit the typical definition of crowd funding. However, these websites do permit accredited investors to back projects at lower investment thresholds (e.g., $1,000, $5,000 per investor), so they employ the "pooling" and online elements of crowd funding.
 

MicroVentures is an "investment bank for startups." It conducts due diligence on startups and then, if approved, helps raise capital from angel investors. 

 

Do some looking around at the options available before jumping in to finding funding.  Some careful research will help you later on as you continue to grow your business.

 

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