Crowdfunding Delivers Entrepreneurs Capital
An entrepreneur isn’t something that you can wake up and attempt to be. You are either one or you are not. It takes a rare breed to take on the challenges and fight the battles that an entrepreneur faces during their climb to the top. It takes a certain drive and determination that not everyone possesses. All of the passion in the world won’t cut it without the following three elements: solid advice, substantial capital, and a network.
Capital is always the key piece, as without it even the best idea will not take off beyond a dream or vision. You would think that it would be as easy as walking into the local bank and requesting a loan, but that is not the case at all. In fact, obtaining a loan from a small local bank is virtually impossible these days unless there is substantial collateral to back up the loan. That brings up another point, because even if a local bank decided to lend it would be a loan, as they do not invest in companies or projects. The SBA isn’t in the business of lending money, they will only back those bank loans provided there is collateral to guarantee the note. What about venture capitalists or angel investors? The media seems to love to mention these potential options, but in truth they only account for 1% of the total funding that entrepreneurs seek, and with the current lending extremely tight right now where does that leave them?
There is one funding source that they can always count on, and that is their own savings. Combine that with personal lines of credit, credit cards, and even second mortgages on their homes, and many will go this route when there are no other options present. This seems viable, especially if they have a solid idea and means to launch it, right? Well, the fact that only about 10% of entrepreneurs are able to secure all of the capital needed by doing this leaves the other 90% struggling to find other capital sources. Personal credit is very tight right now and the housing market is a disaster with few lenders even considering refinancing options, it makes the “personal capital” option very rare. This leaves many to seek additional capital from family members and friends, and although it might be easier to seek the funding from them it can lead to a very uncomfortable situation down the road in the event that the project is not a success as anticipated. Sure, everyone wants to think that their idea is pure gold, but the reality is that far more ideas and businesses fail than make it.
When the above funding methods and sources fail where does this leave an entrepreneur? Enter Crowdfunding! This exciting way to raise the funds required is fairly new and has been gaining a lot of exposure and interest over the past several months. There are a number of websites dedicated to allowing businesses to list their projects in order to attract investor interest. The simple concept has caught on heavily because of social media and the appealing process of finding a unique and interesting idea by simply looking on these sites and filtering down the options to find projects in specific industries that are of interest.
Entrepreneurs are excited about Crowdfunding because they are able to pitch their idea in one central place and allow potential investors to review their information in great detail. It all comes down to an informative and thorough pitch that not only explains the project, but also gives the potential funder some insight on the company or people behind the project. While a solid business plan is always important, investors also like to get an idea as to who the individuals are behind the project. They need to be sure their funds are going into the hands of competent entrepreneurs that have a very realistic shot at making it. Nobody wants to just throw his or her money away, so it is important to have a very strong overall pitch.
When all other funding looks slim to none, Crowdfunding gives a legitimate chance at obtaining the capital needed to get the project off the ground. With so many different Crowdfunding websites to select form it will require some research to make sure that the project is being presented on the best site based on the industry and nature of the project. There are some Crowdfunding sites that only list specific opportunities, such as vide game development, or technology products. Then, there are sites that have virtually no restrictions and they are very easy to spot as they allow any project to be listed. Sometimes these sites will drive away legitimate investors because of the quality of the opportunities. Spend time looking for the perfect website to list on, as it can mean the difference from receiving little interest and reaching the funding goal.
Deals are receiving funding on Crowdfunding websites and we encourage entrepreneurs to take a look at projects that are now closed after successful funding and see how they presented their opportunity. They obviously did something right, so make sure to look at some successfully funded projects to get some profile and pitch tips. Also, look at the projects that exceeded their goal by a large amount. In some cases there will be projects that received so much attention and interest that they raised 1,000% and more of their goal. It is a good idea to see what they did and how they presented their offer.
Although the traditional lending and capital markets are not providing the kind of funding that many companies need, Crowdfunding comes to the rescue with a very attractive option for those companies that need that capital injection in order to succeed. With some research and planning it is very possible to get a pitch in front of the right individuals. For many this is the absolute last shot at obtaining the desired capital, so plan wisely and present as if there are no other options.