When most of us started our first business, it was probably the neighborhood lemonade stand. Your mom donated the lemonade and your dad built the stand. Your family had a vested interest in seeing you succeed. Crowd funding works the same way. It may not be your family but instead a group of people who have an interest in your business or project. They will pool together funding to help you achieve your goal.
These days, crowd funding is how most startups are getting off the ground. Most of the younger generation is turning to KickStarter, a website that helps you organize your end goals, create a platform and begin reaching out to people so you can achieve your goal. You start with your network, but with luck and dedication you can expect to grow you pool to include strangers who are just as enthusiastic about your business idea. It’s a win-win strategy with investors offering something of value in return. Kickstarter launched several years ago and hosted a minimal to moderate showcase of budding entrepreneurs. Since then, it has flourished into a multi-million dollar powerhouse that can still scale down to accommodate smaller projects.
Take Pebble Technology, for example, which managed to raise $10 million in May alone on the crowd funding platform. However, most projects range in the $10K mark and if the funding goals aren’t met, you don’t get to keep what’s already been pledged. Over the last three years, Kickstarter has raised over $323 million for over 10,000 campaigns.
Yet Kickstarter isn’t the goose that laid the golden egg. There are still a number of failures, which are largely due to poor planning. Campaigns usually fail because individuals lose sight of the goal; they see it as a means to raise money for a business rather than as a means to complete a project or launch a product. Failed campaigns also tend to overshoot their monetary goals, which should be based on real budgetary needs and not lofty ideals. And finally, some campaigns just fail to lure in patrons by offering less than desirable or inadequate rewards to pledges. (A helpful tip: Investors are most motivated to pledge dollars when a project is accompanied by an introductory video; to their own detriment, many campaigns don’t take this extra step.)
Kickstarter isn’t alone in the crowd funding venture. There’s Crowdcube, where investors get a small share of the business equity (unlike Kickstarter, which promises rewards and access to thought leaders). For the community-minded, there’s Lucky Ant, which focuses on concentrated support for local businesses through weekly picks.
This brings renewed hope for dwindling small businesses. Instead of calling it quits, you can inject new life into your idea using the exact same platform and business model that startups are using. Who says a business is dead just because it’s out of its business blood – capital? The same goes for enterprises with withering sideline projects. Instead of dumping aside viable ideas because of budget shortages, why not give the project to a junior account executive and task them with the responsibility of turning a seed idea into a profitable venture? The move lets businesses utilize ideation while testing the capability and potential of junior executives.
Thanks to the power of the social web, a campaign with a small origin can quickly take off and draw thousands of people. Investors flock to sites like KickStarter and Crowdcube to source great opportunities. The idea is that anyone can get involved – and they are. People are no longer limited by their lack of venture capitalist experience or their inability to create a convoluted business spreadsheet required in the “old days.”