When President Obama signed in to law the Jumpstart Our Startups, or JOBS Act as it is better known, business startups all over the country become instantly excited. Finally, there would be a new funding source that allowed new businesses to find the funding they needed without having to rely on banks or venture capital firms that rarely loan to businesses without a proven record of success.
The modern version of crowdfunding uses social media and other technologies to bring together larger amounts of investors that can invest smaller amounts of money. If a business needs $100,000, they are more likely to get the funds from 100 investors committing $1,000 than they are from one angel investor committing the full amount alone.
However, it isn’t as easy as it sounds. Along with a larger pool of investors, more business startups will have access to those investors making it more difficult to catch the attention of potential funding sources. How will you prepare your business for crowdfunding?
Unique Selling Point
It’s time to think like a salesman. What is it about your business that is unique? If you’re planning to open a restaurant, what is it that makes your restaurant unique? Naked Pizza is a small but growing pizza franchise that offers healthy pizza. That’s pretty unique but is your business? Investors don’t want to invest in a business that blends in. Before you go after funding, make sure your business stands out somehow.
Have Your Answers
When you put your business in front of potential investors and ask for funding, they will pick your business apart. They will have financial and operational questions, they’ll want to know who your competitors are, if you have a patent on your new product, and what your growth projections are and how you came up with the numbers. Put your business in front of as many people as you can before asking for funding. Once you can confidently answer their questions, you’ll be able to do the same for your potential funders.
You have a while before the SEC completes the adoption of the JOBS Act but remember, when you ask for funding, you gain partners and the decisions you make for your business have to go through the partners too. If you’re a good team player, crowd funding may work well for you. If you prefer to do everything on your own, find other sources of funding.