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How To Raise Money For Your Business Start Up By Crowdfunding

Updated on December 31, 2012

Why Crowdfunding?

Trying to get one investor to support your idea with a large sum of money is very difficult. They take all of the risk financially and therefore they are very difficult persuade, even if you have a strong idea. However by crowdfuding you can spread the risk across thousands of different investors who each invest an amount that suites them financially. Thousands of entrepreneurs have started to take advantage of these crowdfunding websites that exist.

It’s like a dragon-dens scenario, however, instead of pitching your business idea to only five dragons, you pitch to millions of people on the internet. This has numerous advantageous, firstly, you don’t have to go into a ‘den’ without any information in your hand, which you can refer to in your pitch. This will eliminate the opportunity for nerves to get the better of you! Your crowdfunding pitch is more than likely going to enclose a video, a business plan, and a short summery of who you are and what you aspire to achieve. All of this information can be meretriciously designed and written to perfection. There is no ‘one take’ where everything leans on you and your presentation skills on that day. You can rewrite, edit, and re-record your pitch as many times as you like before you go live.

Socially crowdfunding websites can also help you reach your investment target very quickly, social network sites such as Facebook and Twitter can propel your pitch to millions of people in a number of minutes. An example of this success could be the project that was posted on Kickstarter (one of the crowdsourcing websites, more on that later) by Scott Wilson and his design studio MINIMAL. His business idea was to turn the new iPod Nano into a touchscreen wrist watch by converting it using a kit. He designed two models, a cheaper plastic version and higher end version made of aluminium. He set a target to raise $15K in a month to get a small batch manufactured. Well… He raised nearly $80K in the first day alone, his project went viral and he ended up stacking up $942,578 from 13,512 investors at the end of the month, which had effectively pre-ordered the wrist watch kits through the rewards incentives initiative.

Scott Wilson's new project: LunaTik Touch Pen

So what platforms can entrepreneurs use?

Kickstarter FAQ here

Wefunder: FAQ here

Crowdcube: FAQ here

Indiegogo: FAQ here

Fundable: FAQ here

What you need to think about before you sign up:

Crowdfunding is great in many respects, and has helped many entrepreneurs achieve their dreams quicker than they might have ever imagined, however, you need to make sure that this option is for you. Firstly, read the FAQ's carefully! These crowdfunding companies will have their own rules and regulations. Make sure that you agree with them and that your business is suited to the company that you choose.

Think about how your going to deal with your potential 1000 investors. You are no longer on your own. They will have questions and you will have to reply. If you dont like the idea of having to post your progress every so often, perhaps crowdfunding is not for you.

Rewards. Some crowdfunding websites like Kickstarter encourage you to give rewards to investors who invest over a certain amount. Try to be realistic in your own reward system. Only promise what you can deliever, dont go overboard!


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    • Joseph Renne profile image

      Joseph Renne 4 years ago from Milton

    • nightnight profile image

      nightnight 5 years ago from UK

      Glad I coud help. Ha... How embarrassing! Thank you for letting me know.

    • R W Bobholz profile image

      Richard Wayne Bobholz 5 years ago from Durham, North Carolina

      Thank you! This is incredibly useful as many of my clients are technology startups. On top of loans, angel investors and venture capitalists, I'll be sure to direct them to those sites you've listed for crowdfunding. (Unfortunately, you misspelled crowdfunding in your title.)