Have you ever had a great new business idea but lacked the money to exploit it? Yeah, me too. More times than I care to count. For many small business, however, crowdfunding may be the key that unlocks the golden door of your next opportunity to a Great! business.
Crowdfunding has been around for a long time using a variety of different names. Artists, authors, and composers have for eons presold their works and only created them once they have sufficient subscribers to make it worth their while. Now, everyone’s getting into the act. Take a look at GoFundMe.com, Kickstarter.com, Indiegogo.com and other crowdfunding sites and you’ll be amazed at what’s out there.
Two primary types of crowdfunding exist. Rewards crowdfunding, wherein entrepreneurs presell a product or service to launch a business concept without incurring debt or sacrificing equity ownership of their company. Equity crowdfunding, wherein the entrepreneur obtains several small capital infusions from several backers, usually in the company’s early stages, and each backer receives some proportional share of a company in exchange for the money pledged.
For most new ventures, entrepreneurs prefer rewards crowdfunding instead of equity crowdfunding, because they want to continue solely owning their venture, calling all the shots, and keeping all the profits. Nonetheless, equity crowdfunding does have its place in the collection of financing options out there.
So, the next time you have a great idea and no money to back it, think about crowdfunding.
[reminder]How big of a list of potential funders do you think you would need to get a new venture requiring $50,000 of initial capital going?[/reminder]