Seeing a headline like that as a small business owner would make me curious and skeptical all at the same time. Since you clicked through I’ll show you exactly how it can be true for you.
It’s a somewhat new concept which has been enabled and greatly expanded because of the Internet. The friction involved with these transactions has been massively reduced to where it’s now a profitable and easy enough to do concept.
It’s called crowd sourced funding.
The true beauty is you get the money your local business desperately needs to grow without selling any shares nor a percentage of your company.
To recap: you get the capital you need basically for free. These are donations, you’re not selling shares in your company.
There’s one company in particular called Kickstarter Funding Marketplace which is a marketplace bringing together:
1. entrepreneurs and startups with business ideas
2. people who’d like to make donations to fund them.
It’s kind of like Kiva Donation Marketplace in that many people can make small donations from a dollar up to a few hundred dollars in order to raise the capital the business owner is looking for.
So instead of going to an angel investor to receive a $50,000 first stage round of funding you could go into the Kickstarter marketplace and raise the same $50,000 from say 1000 “investors” who are donating to your business costs.
This crowd sourced funding is a great way to see if people are actually interested in your idea. It’s the best form of interest because you find out if they’re actually willing to break out their wallets and donate.
It’s an even better and truer measure because they’re giving you money for free not even expecting a product as they would if they purchased something from your company.
There are a few guidelines though. Obviously, your idea has to have traction and be of interest to people. More than that it’s gotta be interesting enough where they’ll donate money.
The other potential gotcha is it’s an all are nothing deal. Meaning if you set a goal of raising $50,000 and you only get donations totaling $37,388 then you get zero funding.
The one upside to missing your donation fundraising goal is you get a ton of publicity just going through the process and setting up a business account page on Kickstarter.
I’m sure there are other sites out there in this much-needed marketplace and service.
Here’s more from Desert news:
David Alden doesn’t like the idea of selling portions of his company for funding.
The Park City entrepreneur started Recoil, a company that makes universal cord winders just over a year ago.
“It is likely that I will have to part with percentages of the company over the course of the life of the company just to raise enough money to grow it,” said Alden, who quit his job in real estate to pursue his business venture. “I’m very wary of giving up pieces of that company too early in the process.”
Many startups in Utah are turning to Kickstarter, a New York-based fundraising website that allows individuals and groups to receive donations for their projects. This allows low-budget entrepreneurs to find funding without selling ownership of their company for investments.
I see crowd sourced funding only growing in importance because of the disastrous and worsening economies around the globe.
For the first time in history you can get access to millions of people who can make small donations which added up make a massive difference. The barriers have been almost eliminated.
The friction, marketing muscle and time required to find so many small investors has virtually vanished.
This essential capital infusion can be the difference between a startup having the money required to grow or becoming a small business administration statistic as a online business startup that failed because it was undercapitalized.
How do you feel about this funding source? I pledge to read and respond to your comments below.