You have a brilliant idea for a business, but where are you going to get the money? Your savings are never going to stretch that far, the bank won’t give you a loan and although your friends and family would love to help you they can’t afford it.
A good idea but no cash to get it off the ground – it’s a common story for small businesses. You can try to find a wealthy entrepreneur who will put up the cash you need in return for a stake in your company just like in TV ‘s “Dragon’s Den”. But there aren’t too many of those around. Or you can max out your credit cards and remortgage your house. Some of my friends have done that and luckily they’ve been successful. But I wouldn’t recommend it because if it doesn’t work out then you’ll lose everything.
There’s a new way of finding investment which is really hot at the moment. It’s called crowdfunding and it’s where groups of people invest money (often quite small amounts) to get a project going. It’s already popular on the arts scene (a sci-fi black comedy film called “Iron Sky” was made recently thanks to fans who pledged €1.2 million!), but entrepreneurs are increasingly using it as a means to raise money for their business ventures.
The best way to enter the crowdfunding world is through websites like Kickstarter, Indiegogo or Crowdfunder. What you do is upload your investment pitch: tell potential investors about your great new business idea and what they will get in return for investing in it. Then you wait and hope the money will start pouring in…
And it really can. The Pebble, a watch app for smartphones, raised nearly $10 million on Kickstarter. Pledges hit $1 million within 28 hours of Pebble launching its pitch – and it only wanted to raise $100,000!
But, on crowdfunding sites you’ll be up against thousands of other people who are also looking for funding, many of whom will have really good ideas too, so you’ll need to be really sharp to get the cash you need.
For me, the best ideas are those that have really strong pitches and are also a bit more creative in what they offer potential investors in return for their money. They offered things other than just an equity stake in their firm to make investors feel they have an emotional attachment to the project. For example, filmmakers have auctioned walk-on parts or design and audio work in their movies.
The best ideas also exploit the web’s viral potential, using Twitter, Facebook and other social media to develop a real buzz for their idea. Crowdfunder has shown that even business proposals can get fans and what’s great about crowdfunding is that you can attract the money you need and also create an audience that is waiting impatiently for you to launch your product.
If you don’t get the investment you need from one of these sites then it might be time to review your big idea. The market has spoken and it’s said: “we don’t like what you’re offering”. They might not be right, but you should go back to the drawing board and either rethink your proposal or scrap it altogether. You might save yourself a lot more time and money.