Crowdfunding
New options for small business financing
By Marc Kneepkens


From Crowdsourcing to Crowdfunding

There is a new and very exciting way to get funded. Born in the age of the internet, it is still evolving and changing rapidly. Now that we can reach many people with relatively very little effort, the idea of ‘crowdSOURCING’ has taken off. Crowdfunding is just one of the results of the much larger concept of ‘crowdsourcing’.

‘Crowdsourcing’ is the concept of appealing to many people to help solve problems in the areas of ideas, feedback, information, opinion, labor, etc. There are many examples available nowadays. Wikipedia, for example, is the old concept of the encyclopedia transformed by the ‘net’.

A great explanation of this concept can be found in this short video on Youtube. It's made by Crowdsourcing.org and narrated by Crowdsourcing.org's Founder, Carl Esposti, describing the four different ways Crowdsourcing works and the five different categories of things you can do with crowdsourcing. Here is the link:(opens in new window).




From 'donations' to 'fundraising' to a new powerful tool to find startup capital

Crowdfunding and crowdsourcing have been around in many forms for a very long time. Community steps in to resolve problems that individuals could never have resolved by themselves. There are many examples in traditional cultures. Now you can go online and find private fundraising initiatives or donation requests . People are very creative when it comes to engaging ‘the crowd’ for help or for when they are looking for rewards for their efforts.

Individuals, but also governments and politicians, are happily using the principles of inviting the crowd to participate. Crowdsourcing has revolutionized the way politicians implement their strategies. Opening up private funding to a much larger 'crowd' allows  a whole new array of investing to small individual investors.

President Obama created the JOBS Act and signed it into law on April 5th, 2012. In this the idea of crowdfunding received a legalized structure. The SEC had 270 days to figure out the details by implanting rules and regulations. Then small investors don’t have to be ‘accredited investors’ anymore to be able to participate in ‘risk’ investing. Accredited investors have a net worth of at least $1 million, or a net income of minimum $200,000. By law they used to be the only ones to invest in risk ventures. When a company accepted money from the general public in its initial starting stage (like from family and/or friends), later rounds of funding would become much more complicated, if not impossible.

There will be plenty of limitations though. There is a maximum of $2000 to be invested by ‘regular’ people. Investors with higher incomes or net worth can invest up to $100,000. The maximum offering should not be more than $ 1million in 12 months. For more details, take a look at the information from the NLCFA (National Crowdfunding Association).


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Quality Business Plans and Presentations more important than ever

Effective presenting and building your business plan is still the pivotal issue. Now you are not presenting to one investor or one company. You are presenting to a very diversified group of internet savvy and investment savvy people. You still have to convince, prove, negotiate. Internet forums will be passing on information faster than ever. When you make a mistake word gets around. If that is serious enough, you're out. But once you have it right, the power of that same internet will propel your business funding efforts forward.

Having it right is the central point here. There are a few hurdles that need to be taken. SEC reporting and regulations, investor information and disclosures and correct accounting are the most essential ones. Both SEC and investors will need a detailed business plan, and open and transparent due diligence.

The advantages will be clear. Convincing the crowd about your idea or project will be the gateway to easier funding in the next stages of small business financing. That may be the bank (with more cash in the account the bank manager will become much more willing to lend), angel investors or VC companies.

A very first requirement will be to be properly established and incorporated. And again, the internet has brought all that much closer, made it easier, and at a much more affordable cost.

Next, find the right website or portal to deal with the requirements and formalities, and to get your startup capital secured.




Want to get started on Crowdfunding now?

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Find out more about crowdfunding with our expert created training program. Let us show you the ultimate ways to raise money using this new option. This is a very comprehensive program that includes a full year of email guidance with Dave Lavinsky and Growthink's senior team: every question related to crowdfunding will be answered to help you raise money quickly and easily. Click here to see a brief video presentation(new window). The best part: the cost is very low.


We now offer FREE LISTINGS for YOUR Crowdfunding Campaign. Grab the free exposure that you get with our site, and receive valuable comments and feedback from visitors.

Read our page about Crowdfunding Startups here.

Check out these curated articles on Scoop.it on Funding related topics:


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