Until a few years ago, what did you do if you had a brilliant business idea and no bank loan? Perhaps you prayed for a miracle. And now? Well now… you simply crowdfund your business.
Known by many names- crowd sourced capital, crowd financing, and fan funding, crowdfunding is the savior of people with extreme talent but no capital. It is the latest buzz in the world of small entrepreneurship.
It is interesting to note that while the buzz is new, the concept itself is very old. One of the greatest musicians of all time, Beethoven, used crowdfunding to procure funds to compose and play. You, as experts will agree, have an obvious advantage over Beethoven- maybe not in terms of talent, but definitely in terms of opportunities available to you to make your sales pitch heard.
Are you still wondering about what Beethoven never had at his disposal, but you do? Well… the answer is: numerous crowdfunding websites.
So, if you have a brilliant business idea and are high on confidence but, unfortunately, low on cash, make use of online crowdfunding platforms to turn your dreams into reality.
Want to know how you can do this? Read on to find out.
Tips for using crowdfunding for business
It has never been easier to take part in business investing through a group effort to fund a project, and the choices are so varied. Before crowdfunding came onto the scene, investments were in basic commodities and many "safe" ventures with low returns. When you fund a project, it can follow almost any type of endeavor you have an interest and belief in, from household appliances to movies.
Nothing is guaranteed. As we all know from recent events, no investment is a sure thing. Consider the recent FaceBook IPO. This only goes to show once again how volatile stocks can be.
Two Primary Forms of Crowdfunding
Crowdfunding works in two primary ways. Some companies strictly solicit people to fund a project, supplying the seed funding for startup, without having a specific product, service, or idea to promote. This gives the investors a reasonable idea of where their money will be going, but some things remain undecided.
What entices investors into this scenario is how well the crowdfunder sells itself. This often comes from success in other crowdfunding efforts that build a reputation. There may be a board of trustees who choose the actual recipient(s) for the funds under this kind of crowdfunding.
The second primary way to fund a project is to know exactly what you are investing in. Usually, a firm is in charge of raising the money needed, and its other place in the investment scheme is to educate investors in both what they can expect to receive on return and what the associated risks are.
Investors may know the person or group personally for whom the money is being raised. Often, an investor feels so strongly about the possibilities of a new product or service that they will take the lead in the crowdfunding effort. There is no license necessary to solicit people to invest.
A cattle farmer in Southern Limpopo utilizes crowdfunding to aid in pre-selling his beef. He has found it to be a way to re-grow his herd after the mad cow epidemic. This is just one indicator why business finance is morphing from the old ways to more creative ones.
At one time, crowdfunding was simply a vehicle for movie makers or artists to fund their projects, and then as if a revelation occurred, the trend caught on and many others began to seek project funding in this way.
A positive result to come from global economic woes is the general understanding that banks aren't as powerful as people once thought they were. Many big names in finance are no more, and it is evident that changes in banking have only made it more difficult to arrange loans with the remaining institutions.
Business finance through banks has always operated under the concept that the person with money was the only one who could borrow money. There was a phase when the lenders were more lenient with credit and looked the other way regarding some business finance situations that were questionable. Those days are in the past and it is unlikely that they will return.
Ask and thou shall receive. Within this simple idea lies the essence of crowdfunding. We re use t ask family and sometimes friends for advice, favours and sometimes cash and crowd funding has taken this last idea much further. If you are starting a business or creative project and don’t mind giving something in return to those willing to help you get started then crowdfunding is for you.
So where do you start? Well you have actually already started by finding Startme, the South African crowdfunding portal everyone is talking about. Now all you have to do is get your idea and promotional material in order, post your opportunity or project and wait for the funds to start coming in.
The basics of crowdfunding are simple: get a lot of people to each give you a small amount of money, until like a mountain stream filling with melting snow it becomes a torrent of cash. The trick is melting the first bit of snow and starting the stream. In the mountains, spring comes naturally. In crowdfunding, nothing comes naturally and it is all work and persuasion.
You, as a project creator, have developed a great project that everyone you meet agrees is fantastic. The next big step is listing your project and starting to collect the funds.