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How to Raise Funds for Investment through........CROWD FUNDING Explained

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These are interesting days in every respect and things are becoming easier in the financial services worldwide.  In the beginning we had Initial public offers being the way to raise funds from the stock market, a process that takes six to nine months to arrange.

Then, the computer and fintech community discovered the Initial Coin Offer ICOs - where investors are given a token which are traded at the digital exchanges, which they can sell whenever the coin is listed at the exchange. With listing and trading of tokens, the investor has the opportunity to recover his investment and exit if he so desires.

Now, we have Crowd Funding and Crowd pooling initiatives - being another means of raising money from the crowd - the company is pitched against the crowd in a fund raising drive.

In this piece, we are examining CROWD FUNDING - 

What is Crowd Funding?
Crowdfunding is about persuading individuals to each give you a small donation -- $10, $50, $100, maybe more. Once you get thousands of donors, you have some serious cash on hand.

This has all become possible in recent years thanks to a proliferation of websites that allow nonprofits, artists, musicians -- and yes, businesses -- to raise money. This is the social media version of fundraising.

How it works: The most common type of crowdfunding fundraising is using sites like Kickstarter and Indiegogo variety, where donations are sought in return for special rewards. That could mean free product or even a chance to be involved in designing the product or service.

It is also possible to use crowdfunding to assemble loans and royalty financing. The site LendingClub, for example, allows members to directly invest in and borrow from each other, with the claim that eliminating the banking middleman means "both sides can win" in the transactions. Royalty financing sites appear to be more rare, but the idea is to link business owners with investors who lend money for a guaranteed percentage of revenues for whatever the business is selling.

The holy grail is to sell company shares or ownership stakes in the company on crowdfunding sites, because it could be like a mini-IPO without the traditional hurdles. In the past, this has only been legal with accredited investors, people who each have more than $1 million in net worth or more than $200,000 in annual income.

The good news is that the Jumpstart Our Business Startups Act of 2012 allows stock to be sold to the general public over crowdfunding sites, but as of mid-2013, the SEC was still hammering out the rules.

Crowdfunding provides another strategy for startups or early stage companies ready to take it to the next level -- such as rolling out a product or service. Before, a business owner was subject to the caprices of individual angel investors or bank loan officers. Now it is possible to pitch a business plan to the masses.

A successful crowdfunding round not only provides your business with needed cash, but creates a base of customers who feel as though they have a stake in the business' success.

If you don't have an engaging story to tell, then your crowdfunding bid could be a flop. You can decide not to receive money until you have adequate commitment that meet the fundraising goal.

It could be even worse if you meet your goal but then realize you underestimated how much money you needed. A business risks getting sued if it promises customers products or perks in return for donations, and then fails to deliver.

There is also an argument to be made that angel investors and even bank officers provide more than just money. They provide entrepreneurs with needed advice. Business owners miss out on such mentorship when they ignore traditional investors and turn to the crowd.

Have at least a small network of enthusiastic friends and family willing to help get the ball rolling by giving and urging others to give.

If you're giving out perks in return for money, make sure the perks are cool.
Present a serious business plan and an explanation of why the money will take your enterprise to the next level.

Demonstrate that you have your own skin in the game because of the personal funds you have already poured into the business.

Include a video pitch and keep it short and concise, with a call to action.

You may includes different rewards for different levels of giving; so should you.

Be prepared to essentially live online, staying active on social media sites, until the crowdfunding campaign is complete.



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