Back in the old days, if you needed capital for your business, you typically went to your local bank, presented them with a business plan that outlined your financial projections, and received a loan based on the soundness of your plan and your relationship with your banker. Nowadays, of course, things have changed, and many for the good.
You now have many ways you can raise money for your business, including:
- Self-funding (your savings and credit cards – although be careful of going into too much debt!)
- Bootstrapping (grow your business as revenue comes in)
- Loans from friends and family
- SBA loans
- Angel investors
- Venture capitalists
- Incubators and accelerators
- Crowdfunding (the newest way to raise money)
Investors will be interested in your business if you can show that it can be scaled quickly and that it has the potential for a large payout for them, usually by selling your company to a larger one or via an IPO (initial public offering).
Depending on your business idea and your personal desires (remember that gaining investors typically means you lose equity and some control of your business), you may or may not be interested in pursuing outside investment.
Crowdfunding, on the other hand, allows you to raise money without needing to give away equity or operational control. It’s also an excellent way to measure interest in your product and reward early adopters, who will often be passionate about your business and help spread the word. The two most popular crowdfunding platforms are Kickstarter and Indiegogo.
Here’s an example of a really well-done campaign (and one that I have backed!).
The video opens with author Colleen Patrick-Goudreau eloquently describing the problem, then introducing the solution, and finally appealing to contributors by clearly explaining how they can be a part of the campaign and what perks they can receive. The campaign description outlines what the funds will be used for and shows examples of what will be included in the final product. A model campaign!
Here are some good articles for tips on creating a successful crowdfunding campaign:
- “How to Create a Kick Ass Crowdfunding Campaign and Make Your Dreams Come True”
- “How to Create a Crowdfunding Campaign for Under $100”
- “7 Video Tips for Crowdfunding Campaign Magnetism and Results”
Have you ever backed a crowdfunding project? If so, what motivated you to do so?