If you’re weighing your options to get funding for your startup, seriously consider crowdfunding. It’s a great way to rally support around your brand (especially if you have new-to-market products that need a little extra exposure) and get the money you need to grow your business.
The Latest News About Crowdfunding
For the past several years, the SEC hasn’t quite known what to do with crowdfunding. It doesn’t exactly fall in with traditional venture capital and investments, and the Average Joe wanted to invest in companies through crowdfunding sites like Kickstarter.
After much deliberation, the SEC finally passed a law that opens up large-scale crowdfunding campaigns to non-accredited investors (i.e. folks like you and me). That’s great news if you’re thinking about launching a crowdfunding campaign, because you’re not limited to the investors you pitch to get money. And little investments from people can add up quickly to tens of thousands of dollars, if you manage your crowdfunding campaign properly.
Speaking of Marketing…
Marketing is essential for the success of your crowdfunding campaign. Don’t expect people to just happen upon your crowdfunding page and drop $10k. You need to develop a strategy to reach out to your existing contacts (in-person and online) to tell them about your fundraising efforts and invite them to participate.
You need to have great incentives to get people to give you money. Some crowdfunding sites require you to offer different tiers of “giveaways,” like early access to your new product, a t-shirt, or an invitation to a special event.
The key to a good crowdfunding marketing campaign is consistent effort. You can’t tell your Twitter followers once and expect the investments to roll in. Plan out your communication for the months or weeks it takes you to raise the money.
Other Things You Need to Know About Crowdfunding
Check the fine print on the crowdfunding site you want to post your funding project on. Some say that if you don’t raise the amount you set out to get, you get none of what you do raise. Others will let you access whatever you end up raising. Knowing which policy a site has can help you determine what amount you want to try to raise (and there’s no “penalty” if you raise more than you set out to, so that’s a good strategy).
Also, do your research on taxes. There’s still some gray area about how crowdfunded income is taxed, so you don’t want to be taken by surprised come tax time.
Crowdfunding can help you get access to funds to grow or launch your startup, without the stress of pitching investors and VCs.
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