Crowdfunding Businesses and Startups: The Ultimate Guide

As a result of recent successful multimillion-dollar online fundraising campaigns for products such as the Ouya, Pebble E-Paper Watch and Amanda Palmer’s Theater is Evil album/tour, which have captivated audiences worldwide, crowdfunding is quickly becoming a business staple. Hailed by many entrepreneurs as a better alternative to venture capital or angel investment, interest has also been piqued by the recent passage of the JOBS Act, which legalizes the crowdfunding of limited equity transactions.

In essence, crowdfunding is a disruptive process that empowers creators and inventors to showcase projects publicly in the form of text descriptions and video pitches, and to solicit everyday Internet users in hopes of raising donations. Hosted on online websites and services such as Kickstarter and IndieGogo, which function as showrooms, the public can then vote with their wallets by submitting cash donations to projects they’d like to see succeed.

The model isn’t just meaningful because it bypasses standardized investment routes such as VC firms or angel investors, from whom entrepreneurs and startups typically seek the money needed to recognize their vision. Similar to other disruptive high-tech financial models, such as those innovated by eBay and Amazon, crowdfunding represents a paradigm shift that challenges the status quo, encourages change, and facilitates the growth of new ideas. Moreover, it also takes the power to bring great ideas to life out of the hands of the powerful, wealthy and influential few, and lets the general public decide which projects deserve to come to fruition – not distant tastemakers. Looked at another way, it allows projects of all kinds a chance to succeed, even when the pure profit motive is not the driving force. This is both exciting and empowering, as it means that deserving concepts, businesses and products that might otherwise have gone ignored or stagnated in a wealthy investors’ inbox can suddenly fulfill their potential.

Why Does it Matter?

At a base level, crowdfunding is both democratic and Darwinian. Everyday Internet users can browse what’s essentially a catalogue of new concepts and ideas and vote winning picks to market in the form of preorders or donations, while project creators vie for attention and cash. Some ideas succeed. Some don’t. And while the reasons for triumphs and failures can be as vast and manifold as there are original pitches, crowdfunding campaigns create lasting value with each passing effort. Besides helping draw attention, dollars and interest to a multitude of creative projects, through the exposure granted by crowd-funded initiatives creators gain knowledge and information to help them better right-size and target audiences, mitigate financial risks, and draw public and media attention to new products, projects and businesses from day one.

Likewise, crowdfunding puts the power to bring ideas to life into the hands of the general public, who can even give rise to projects and products that deserve a shot at stardom, but aren’t meant to be money-making enterprises. The process can also provide a better sense of public opinion and what everyday shoppers want – impressions that don’t always align with major corporations and organizations’current portfolio or product offerings(including both private and public providers of creative work). Crowd-funded projects can range in size from local community projects like record shops, art exhibits, skate parks, parades and small events to large-scale undertakings such as the development of new books, films, apps, video games, TV shows and software products. Several high-profile and well-publicized projects have recently brought attention to the field, with The New York Times estimating that 50,000 projects have raised over $207 million in the last three years on Kickstarter alone. The site, anticipated to exceed $250 to $300 million in funding in 2012 (crowdfunding as a whole was expected to have doubled to $2.8 billion in size in 2012), has already generated eight-figure sums for a growing number of categories including film, music, design, publishing and technology.

The Benefits of Crowdfunding

Crowdfunding serves several purposes which benefit both creators and fans alike, such as:

Allowing creative projects of all types, and sizes, to get the funding they need, without having to resort to traditional investment initiatives which may require that creators make significant compromises in terms of features,finances, ownership and creative vision.

Acting not only as a cash-generating activity and promotional tool, but also a reasonable barometer of public opinion. All things being equal, a project that satisfies a pressing public want or need will succeed, and something undesired will not – which may save all parties involved a significant amount of wasted time, money and energy. It may also help project creators better refine their approach, audience outreach efforts, planning, production and marketing strategies.

Serving as, essentially, a means to pre-sell products or services, which helps bring revenue and awareness in even prior to launch, and connect directly and emotionally with customers, who can be turned into ardent evangelists.

Crowdfunding does not come with the traditional loss of equity that often accompanies private investment, and often allows creators to keep 100% of their brands, companies and intellectual property.

Backers may also help contribute to projects more materially – by contributing merchandise, services or awareness-generating activities – and help spread the word through social contacts.

Backers can additionally serve as a focus group, providing meaningful and actionable feedback that can help you refine positioning, feature set, marketing efforts and even the product itself.

From a campaign maker’s standpoint, the single most important benefit of crowdfunding is that it leads to far greater diversity in the creative space. Case in point: With over $20 million dollars raised for gaming projects on Kickstarter thus far alone, and many of the biggest successes coming from supposedly “dead” genres and well-respected, but previously long-retired designers, crowdfunding isn’t just resurrecting dormant brands and creators. It’s also returning the power to create works of art and brilliance to the garage experimenters and tinkerers, who otherwise lack the resources to realize them – visionaries much like those who defined many now mainstream industries’ early cottage years. The advent of crowdfunding will continue to play a significant role in helping encourage that explosion of creativity, while also allowing many projects that would not receive traditional funding support – whether due to offbeat topics or seemingly hard to commercialize approaches – to succeed.
A powerful resource for creative individuals in any field – be they filmmakers, artists, inventors, entrepreneurs, merchants, software programmers or even everyday Internet users – crowdfunding suddenly allows anyone to succeed. While the practice isn’t for all individuals or businesses, and isn’t as simple as it may seem in the headlines, for those with the vision, energy, skills and determination to pull a successful crowdfunding effort off, it may literally help bring dreams to life. And looking past the individual success, the chief beneficiaries of this creative explosion? All of us.

Crowdfunding Expert Hints and Tips

With businesses soon able to able raise up to $1 million online through the sale of equity ownership, wondering how to get your own startup, project or campaign funded? Following, you’ll find a recent keynote speech we gave which reveals just what crowdfunding means to enterprises of every size, including small businesses, and expert hints, tips and tricks for creating killer campaigns. For more, you can also check out recent book The Crowdfunding Bible, which is 100% free to download online.
Source: huffingtonpost – Scott Steinberg

HEADLINE NEWS

ForbesHow One Startup Raised 10 Times Its Original Crowdfunding GoalForbesRunning a successful crowdfunding campaign isn't easy. The odds are heavily stacked against you, as very few end up succeeding. "Statistically, up to 89% of campaigns fail. Kickstarter has the highest [...]

ForbesThe Ultimate Pre-Launch Crowdfunding ChecklistForbesCrowdfunding is not limited to the platform where you launch your campaign. Instead, it has become a valuable way to transform your idea into a mainstream business. In order to head in that direction, you must execute a number [...]

Eater LondonFat Macy's Launch Crowdfunding Campaign to Open Restaurant in PeckhamEater LondonFat Macy's — a food social enterprise which aims to train young Londoners living in temporary housing — have launched a crowdfunding campaign. Their aim is to raise £55,141 to fund a [...]

Realnoe vremyaEveryone pools: Elvira Nabiullina to look closer at crowdfundingRealnoe vremyaThe Central Bank has seriously started fighting against crowdfunding platforms. The regulator told the gradual imposition of control of the sector won't begin earlier than in 2018. But mar [...]

Devon LiveCrowdfunding campaign launched to save adopted Romanian puppy who needs £8000 for vital surgery to save its lifeDevon LiveSam has started a crowd-funding campaign to try to help meet the £8000 cost of the surgery. It's a tall order, but every little helps. Sam had been [...]

U.S. News & World ReportNo Cash for Hate, Say Mainstream Crowdfunding FirmsU.S. News & World ReportThe block on mainstream crowdfunding is just the latest blow to far-right activists operating online. In the last 24 hours, neo-Nazi website the Daily Stormer had its domain regi [...]

The AustralianIgniteme heats up crowdfundingThe Australian“The only other comparable film that raised money through crowdfunding would be Crocodile Dundee, but not all funding came from the crowd.” Mr Morello said the idea behind the platform was relatively simple — giving new and bud [...]

UKTN8 simple steps for a successful equity crowdfunding campaignUKTNTom Horbye, senior campaign development associate at Seedrs, shares his top tips for a successful equity crowdfunding campaign. Here are eight easy-to-follow tips to help you devise and launch a successful equity crow [...]

LivemintFinding the right balance on crowdfundingLivemintSecurities market regulator Sebi (Securities and Exchange Board of India) has been trying to get a handle on digital platform-based crowdfunding since at least 2014, when it issued a cautiously positive consultation paper. It fl [...]

Crain's Cleveland Business'Smaller' gifts can go long way for Clinic's crowdfunding platformCrain's Cleveland BusinessFor an institution accustomed to securing multimillion-dollar donations, Cleveland Clinic's latest fundraising effort has some relatively [...]

CFB Finance

Syml
Lst Val
+/- Val
+/- %

Marketwired

  • Crowdfunding
  • Crowdfund
  • Peer to Peer Lending
  • FinTech
  • Reg A+
  • Reg CF
  • Crowdfunding USA

Press Release

Live Crowdfunding .tv

What's Next Step in Regulation A+ JOBS ACTS Title IIII :L Interview : Steve Cinelli with Brian Korn Securities and Crowdfunding/Peer-to-Peer Lending Lawyer, Watch more video library | Conference | Interview | Campaign Showcase | Research | Education |