How to Take Your Startup to the Next Level With Crowdfunding

Although it shouldn’t sway you from the attempt, these are tough times to get a new company off the ground. Launching a startup is always a tricky proposition, but the recession economy has made your prospects of success even more limited. A great idea and the passion to see it through to the marketplace is always necessary, but a startup requires funding as well. And that’s where you could run into trouble these days. Money is tight all around, and even professional investors and venture capitalists are being more frugal, hedging their bets with sure things in the hopes of maximizing their return. If you have a limited track record or a product or service that takes a leap of faith, you may well have trouble securing the money that you need to get through those crucial first months. This is where crowdfunding comes in. Here’s a quick look at how to take your startup to the next level with crowdfunding.

First off, you’ve got to understand this new and viable method for raising money. In a nutshell, crowdfunding is when you launch a fundraising campaign through a site designed to help with such matters. You set a timeframe and a financial goal, and then reach out into the widest possible community looking for people willing to contribute a donation in exchange for some great incentives and rewards. The rewards you offer could be anything from a free version of the product you are looking to create to a one hour consultancy in your area of expertise. There are no rules other than your own creativity and what you think you can deliver. At the end of the timeframe you’ve hopefully reached your goal, and now have the money you need to launch your startup without having given up any ownership stake in your company.

It sounds too good to be true, and for many people it is. It sounds simple, but the execution is incredibly complex. If you ask some of the folks who have crafted successful crowdfunding campaigns they’ll all tell you that it takes near full time work to insure success. And that’s on top of actually preparing your business for launch and finding time to make a living, raise your family and have some amount of social life in the process. So start things off by acknowledging that something will have to be put aside for a while. Perhaps you won’t be able to go on that vacation you were planning, or take the nights off as you have in the past. Be willing to give something up in order to make the time for your campaign, or your efforts will go wasted.

While you will have to sacrifice in at least one area for crowdfunding to take your startup to the next level, it shouldn’t be in networking. The larger your network, the greater the chances of success. Use some of the basic rules of marketing to understand the scope here. As a rule of thumb, people have to hear about something at least five times before they will engage. If you’re asking folks for money, that number could be even higher. And look at the basic expectations of internet marketing to realize how many individuals you will have to reach. In the online marketing world, a ten percent conversion rate is considered astronomically good. So if you’re trying to raise $20,000, and your expectation is the average person will contribute $50, you’ll need 400 people to give money to the campaign. That’s a large number, and it becomes even more daunting when you realize those 400 are only 10% of the total people you will have to expose to the campaign. If you’re truly committed to raisingĀ equity crowdfunding, it’s going to take an enormous networking effort. So start early, and build constantly. At the very least you’ll begin to understand the viability of your idea. After all, if you can’t get that amount of people to engage with your work, how can you expect your startup to be successful?

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