Crowdfunding Startups, what do you need to know?
By Marc Kneepkens

In this article written for 'crowdfunding startups', I want to point out a few things that may lead to success or failure of your crowdfunding adventure. Some important choices need to be made to make 'crowd financing' work. Not every small business will be successful, and for some, this new type of funding for small business is not the right way to go.

That said, some call crowdfunding the biggest breakthrough in financing your venture since private investors or companies started competing with the banks. However, now that the banks have become rigid institutions, and venture capital companies are unattainable for many small businesses, where do we turn to?

Crowdfunding may indeed be the tool that will 'jumpstart' our startups into existence and success.

A few of the basics have been covered already in the article 'Crowfunding, New Options for small business financing'(new window), and in our article on 'Marketing your Investment Proposal'(new window).

Crowdfunding Startups may be the only way for many entrepreneurs to get funded!

First main decision to crowdfunding startups is which portal or website to choose. That choice will be defined by what you want to accomplish, and what each of those sites offers. Some focus on 'donations' funding only. As a startup, don't dismiss this idea. Imagine your situation by getting funded with donations. You don't have to pay back debt or hand over equity. Starting with a small amount may get you going for a first round.

Some portals focus solely on equity investors, debt investors, or even just on 'rewards'.

Rewards are perks, gifts, or other 'advantages' given to the people who pledge to invest in your campaign. With some creativity, nice rewards can be created. They can cost very little or nothing at all to you or your company, but may mean a lot to your backers.

After choosing the right platform, it is time to think about your campaign. Crowdfunding startups need an approach with the internet in mind, mainly. Understand how to play the social media well. With tools such as Twitter and Facebook you can start with your small circle of friends, acquaintances, family and your direct connections. The psychology and delivery of your information is not exactly the same as to a venture company. However, the first contact made with an angel investor or VC is usually also only a small teaser message. It's all in the first 'view' of your message, and that counts for funding for small business too.

What you need is :

  • visual appeal
  • simplicity
  • direct, clear, compelling
  • make your point

In crowdfunding terminology, your tag line is of major importance, your following message is short and very much to the point. Internet dictates brief messages, quick reads, eye catching visuals, remarkable stories.

Next: personalize your message. People want to know people, especially if they are going to send you money. Tell them more about your project and about yourself. Build in links to a blog, a website, or a place where they can access files about your project.

Crowdfunding startups need a campaign that leads to success from day one. Use the concept of campaign circles.

Start with your 'knowns': the people in your first circle, such as family, friends, acquaintances, direct connections. Basically, this is your support team.

Start briefing them even before your campaign launches. Consider them your team. 'Prep' them into anticipation and excitement. Just the fact that you will go for a crowdfunding platform will wake them up. Next, without 'over' excitement, inform them. Ask them to carefully think who might be interested in the concept that you are promoting. Don't emphasize money as yet, talk about the value that you have to offer. Ask them to prepare a list of people to forward your information to once it is posted. Then make the big announcement. Include the link, make it very clear that this needs to be shared. Tell them that their personal introduction will make a huge difference.

Your next circle arises from the invitation that you extend to your first circle: ask for help and support. Tap into their social networks. Build in the right elements for continuation: perks/rewards, proper information, energetic approach, with goals well defined, and a good sense of urgency. Crowdfunding campaigns are usually closed after 90 days. That's why your preparation has to be ready before you start.

The second circle of 'crowfunding startups' is composed of supporters that you did not know before your campaign started. Once you get the ball rolling, all of your energy should go in perpetuation, continuation, adjusting if necessary, and responding to all incoming communications. These may be questions, comments, criticism, or just acknowledging that you are there. This becomes important once you go beyond your first circle.

Then comes a final circle: your campaign has moved out of your control. It either has become too big, or very successful, or, it is attracting unexpected results. You may get into local press. You may be promoted through other websites. At this point, a little PR will do wonders and finalize your success. Don't be afraid of a press release, or some specific updates in the 'new media'.

On this site we also have a page with FREE LISTINGS for your campaign. Take advantage of the free exposure that you will get from our site. Hundreds of new eyes visit our site daily.

Another outcome may be that you need an extra 'push' to get your 'crowdfunding startups' campaign moving some more. Especially raising money for funding for small business. In that case, consider renting an investor database. Imagine the scope of your campaign when adding tens or hundreds of thousands of investors to your well-written invitation. Every angel investor has his/her social media circles too. Once invested in your venture, they will ensure that you move in the right direction.

Some final suggestions: 'Crowdfunding startups' is not raising money for charities or social causes. You are raising money for a real business. Before you start, make sure to have your information lined up. Talk to an attorney, absolutely. "Equity" Crowdfunding is a totally different ball park.

Have a business plan ready to show for potential investors. Make some realistic projections. You do need a business development plan for yourself anyways.

Once you reach your crowdfunding target, think about multiplying it even more. Or go to the bank afterwards, with cash in your account, they will be much more willing to extend some credit or loans.

For a well laid out plan on how to use the medium of crowdfunding, check out Dave Lavinsky's Crowdfunding Formula. This $97.00 program really over-delivers. Dave offers a straight road to funding, avoiding the mistakes, using the strategies and tips that work. And, as usual, there are many very valuable bonuses included, worth a lot more than the price tag of this program. Click here for a 15 minute presentation on crowdfunding startups  by Dave.

Check out these curated articles on on Funding related topics:

To join our Facebook page, and get regular updates through Facebook, click our little logo on the right, you'll get on our Facebook page, and there you can click on the 'Like' button

Use the form below if you want to contact us for crowdfunding service, investor database services, or anything else we can help you with.

Please note that all fields followed by an asterisk must be filled in.

Please enter the word that you see below.