If you ask any entrepreneur, they will tell you that the biggest barrier to living their dream is the funding needed to get their business off the ground. It doesn’t matter if you’re a first-time entrepreneur or somebody who has started numerous businesses in the past, the problems are the same. The post 2009 credit markets are hyper sensitive to risk making it difficult for any business to find investors who will take the chance on a new idea.
The internet has revolutionized our lives and for entrepreneurs, it offers a solution for your funding problems. Crowdfunding is a way for investors to pool their money together in an unconventional way. Entrepreneurs can submit their business plans to a crowdfunding website for approval and once the plan is posted, investors from all over the world have the opportunity to invest in the idea.
The best part about crowdfunding isn’t the worldwide exposure, (although that’s certainly a plus) but instead, the idea that anybody can become an angel investor. Some sights require only a few hundred dollars as a minimum investment so now, the entrepreneur has a much deeper pool of money available to them. No longer do they have to worry about looking attractive to handful of local angel investors or venture capitalists. They now have access to the hundreds of millions of people who would like to invest a smaller amount in to a great idea.
Crowdfunding takes on many different forms. One popular website, kickstarter.com, isn’t so much a website for angel investors and venture capitalists. Instead, kickstarter.com offers a return of a persons money in a different way. One person who was making a silicone keyboard that sits on top of an IPad for easier typing raised money by offering a free keyboard to anybody who invested $45 or more. He raised far more money that he had hoped.
Other sites like microventures.com is a more traditional crowdfunding site that brings together investors who meet certain financial standards and entrepreneurs who have business ideas that are highly developed and have measurable progress.
Entrepreneurs shouldn’t see crowdfunding as a way to gain investors on a less than polished idea. The legitimate crowdfunding websites require detailed information about a business including financials, proof that the business has registered with their state, a detailed business plan and information about the founders. Entrepreneurs are best advised to treat crowdfunding the same way that they would treat a meeting with an angel investor or venture capitalist.
Crowdfunding is sure to change how businesses find the capital they need to open their doors but don’t make the mistake of seeing crowdfunding as an easy way to get around the meeting you would normally have with investors. The standards are often just as high.