Category Archives: Business Funding

How to Run a Successful Crowdfunding Campaign

With banks and other forms of traditional funding for small businesses all but vanished, many entrepreneurs are turning to Crowdfunding to raise money for their business.

Sadly, a majority of these entrepreneurs are failing to raise the money they expected.

That’s why it was exciting to find the Kauffman Foundation teaming up with Slava Rubin, founder and CEO of Indiegogo, to present a Kauffman Sketchbook video on Crowdfunding.

In this video Rubin offers practical suggestions and insights on how to be more successful with our Crowdfunding efforts.

Here is the 3 minute Kauffman Sketchbook video, narrated by Slava Rubin:

 (email readers, view video on my blog.)

 

Note that Rubin points our the fact that Crowdfunding is not an easy avenue to millions of dollars—raising money through Crowdfunding is hard work.

Also, if you missed it the first time, go back and take another look at the insights from Indiegogo analytics of more than 190,000 campaigns.

Here is a summary of those insights as presented on the Kauffman Foundation website:

  • A campaign that reaches 25 percent of its funding goal within the first week is five times more likely to hit its target.
  • Posting a campaign update every five days or less will raise four times more money than updates posted every 20 days or more.
  • E-mail is the No. 1 tool for generating support for a campaign. Facebook is No. 2 and Twitter is No. 3.
  • Campaigns that include a video will raise 114 percent more money than those that don’t.
  • On average, successful crowdfunding efforts will hit their target on day 36 of a 47-day campaign

(To see the entire Kauffman Foundation article, click here.)

So, if you work hard enough creating a good pitch, and then promote your pitch by being proactive, you can increase your chances for success—if you are pitching to the right audience.

Yes, it is a lot of hard work, but in many cases today, Crowdfunding may be your only choice.

What has been your experience with trying to raise money through one of the Crowdfunding sites? Let us know?

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A Video Primer on Crowdfunding

With all the new Crowdfunding websites being launched, as well as new regulations being released, this form of funding is becoming fairly complex and more difficult to understand.

Things will only become more complex when the equity investment by non-accredited investors is allowed sometime next year.

That’s why I was delighted when The Kauffman Foundation sent me a link to their video that discusses some of the “ins and outs” of Crowdfunding.

One of the best features of the video is the presentation of actual successful Crowdfunding projects. Of course, there are also a number of “takeaways” in the video for everyone.

Here is the video—provided by the Kauffman Foundation (best watched in full screen):

(email subscribers can view the video here)

Here are some of the issues covered in the video for anyone considering participating in today’s offerings:

  • How much should I ask for?
  • What are my chances of reaching my goal?
  • How many rewards should I offer?
  • What kind of rewards should I offer?
  • Why should I offer more choices?
  • How involved should my backers get?
  • How much work does it take to apply, and then follow-up after the project is funded?
  • Is Crowdfunding something I should even pursue?

So, if you are looking for startup, or expansion, money for your business, I highly recommend you watch the above video—and then put together your video “pitch.”

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New Crowdfunding Rules Released

A few days ago—in accordance with the JOBS Act—the SEC released new rules, regarding Crowdfunding, that allow private businesses to advertise for equity investment in their business—otherwise known as “general solicitation.”

Up to this point it has been illegal to advertise for investments in private companies. This was called “solicitation” and was forbidden by the SEC.

Not only did the old rule make it difficult for seed and early stage startups to raise money, but it also made it difficult for many of the nations “accredited” (anyone with $ 1 million in assets, or earnings of $200,000 per year) investors to find good opportunities for early stage investments.

That is why it has always been important for new startups to use advisory groups and business networks to get introduced, or referred, to “accredited” Angel investors—which is still a good idea, because the rules allowing only accredited investors to invest is still in place.

Money in water

Within hours of the release of these new solicitation rules, new online services were announced to help fundraisers find and verify potential investors.

More of these verification services will undoubtedly spring up in the coming days, and If you are looking for one of these services, you can do a search online.

The same holds true for finding help to assist you in getting your advertising message to the right people. There are so many new services being introduced, it is best to simply do a search and then carefully study what is being offered.

The SEC has provided three very specific techniques that can be used to ensure that people responding to investment advertising are actually qualified investors, so make sure any service you use follows these techniques closely.

Naturally, there is some concern that these new rules do not offer enough protection for inexperienced investors. There is a greater opportunity here for dubious or fraudulent investments.

The bottom line is that with the advent of this advertising capability, both the business searching for money and the investors that respond must be extremely diligent in assessing any proposed opportunities.

Of course this is only part of the JOBS Act. The major aspect of the act (that most people are still waiting for) would allow non-millionaires to invest in private companies. But this has not yet been addressed by the SEC—and may not be for another year.

Will this new rule by the SEC make any difference in your search for investment money?

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Update on Crowdfunding

I posted an article last fall explaining the new type of Crowdfunding coming as a result of the Jumpstart Our Business Startups (JOBS) Act that became law on April 5, 2012.

I said in that post that I would keep you up to date on the progress of the Securities and Exchange Commission (SEC) as they developed the rules and regulations that would put the Crowdfunding section of the JOBS Act into practice.

Here is what has happened since the passage of this law over a year ago:

Empty Boardroom

 

 

           NOTHING!

 

 

Crowdfunding is still limited to “accredited” investors, or donations, only. Non-accredited investors still cannot invest directly into non-public small businesses. (See my article of Nov. 19,2012 for an explanation of “accredited” investors.)

Interestingly, however, there have been dozens of new crowdfunding sites popping up on the Internet in anticipation of the release of the SEC regulations.

There are far too many of them to list here, so I suggest you connect with this website that maintains a list of current crowdfunding sites. New sites are popping up daily, so be sure to check the list periodically.

Some sites have estimated that there may be around 1,000 crowdfunding sites available by the time the SEC releases their regulations.

Of course, these estimates usually combine all the Peer-to-peer sites, lending sites, equity sites, donation sites, and non-profit sites that are coming online.

Have any of you tried crowdfunding? What was your experience like?

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“Bootstrapping”–Financing For Small Business

The term “Bootstrapping” has been loosely tossed around the business world for a long time. It is usually directed at the business that has consistent revenue, where the term refers to organic growth by reinvesting that revenue.

On the other hand, what about the entrepreneur who would like to start a business, but has no money, no assets, and no credit. How can that person even think about starting a business? Fortunately, there is always ‘real’ bootstrapping.

For many entrepreneurs, financing their small business seems like an impossible task. The truth is: obtaining money to start and operate a business is often the most difficult part of becoming a small business owner.

Unfortunately, there are no hard and fast rules about financing our businesses—we are left to fend for ourselves … and that’s why I wrote Small Business Bootstrapping: And Other Alternative Ways to Finance Your Small Business.

 

HR 3D front2

 

This book is one of my Primer Series books and is written specifically for the new, or aspiring, entrepreneur and new small business owner. If you want more information about this book right now, you can click here.

 

 

Small Business Bootstrapping was written to help all entrepreneurs to:

  • Understand the challenge of financing a small business
  • Make sense of Bank, SBA and other “normal” business financing
  • Demystify Venture Capital and Angel Investing
  • Learn about Crowdfunding and other “creative” business financing
  • Gain an understanding of “real” Bootstrapping

This book is directed at the new or aspiring entrepreneur, and is presented in simple language—without any financing “jargon” or investor double-talk.

Small Business Bootstrapping concentrates on “creative” financing avenues, and there are also several website addresses included for many of the sources available for small business financing .

So, if you are stumped on how to finance your upcoming business—or you want to grow an existing business—you should take a look at this book. To see a sample excerpt of what’s in the book, take a look at Amazon’s “Look Inside,” —click here.

If you would just like more information about this book, click here.

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How Not to Pitch to a Shark

Financing a small business is difficult at best, and very few people get to pitch to an Angel Investor during an early stage of their business.

For instance, of the 20,000 businesses that apply to appear on Shark Tank each season—only 60 are accepted.

With those odds, you would think that anyone accepted to appear on the show would prepare, rehearse, ask for critiques—and then practice and practice until it became second nature.

Following is a perfect example of what happens when one of the select few who get to appear on Shark Tank is not prepared to present their “pitch”:

 

 

Also, it is not only the Shark Tank presenters who need to prepare their pitch—the same is true of every entrepreneur who needs startup financing from someone, somewhere.

It doesn’t really matter whether you are pitching your Aunt Edith, or an A-list Venture Capitalist—you need to prepare, prepare, prepare … and then do it all over again.

As Mr. Wonderful said: “Don’t worry, it’s only the biggest moment in your life.”

If you can’t give a concise, and exciting, description of your new business venture in (2) minutes or less—you really don’t know your business very well, and whoever you are talking to will quickly know it.

If you have trouble pitching your business … you should look for a partner to help you start the business and be responsible for getting information about your business across to other people.

Have you ever had a “brain freeze” like this poor guy had?

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