Crowdfunding: Bridging the gap between struggle and Venture Capital
Money, money, money…in most cases when starting a business it takes money. Some businesses can have low start-up costs while others can have a lot more. New business owners or aspiring entrepreneurs often cite this as their first thought when trying to build a business, “how much do I need and where can I get this money?”
Some entrepreneurs have the luxury of being able to borrow from friends and family. If they believe in you and have the means, then they can help offset some of the initial costs. But in today’s economy where most people don’t have extra money to risk (because the vast majority of new small businesses fail), a lot don’t have this luxury.
Many entrepreneurs resort to credit card debt and taking out loans, some even going as far as taking out home equity loans. This is exceptionally risky due to the fact that most small businesses fail and either way, these loans and debts need to be paid back. You can have all the belief in yourself in the world but if the market doesn’t feel the same and your business fails, it can lead to a bad situation.
Venture Capital which is defined as capital invested in a project in which there is a substantial element of risk, typically a new or expanding business, can be a great option for startups but it’s not for every business. This option is customarily for businesses that have a tremendous growth opportunity and can offer large returns for potential investors. Not every business is investable but these small businesses that aren’t can still have an enormous impact on their community as well as make a comfortable living for the owners.
Now we’re at an impasse because you want to start a small business but you don’t have friends and family to loan you money, you don’t want to take out any loans or accumulate debt, and your company isn’t looking to be the next Amazon…so Venture Capital isn’t your answer either.
I have a solution, one that is quickly growing and becoming increasingly popular for entrepreneurs everywhere. Crowdfunding.
By now most people are familiar with crowdfunding, even if they don’t fully understand it. I’d venture to say all of us have received Facebook requests at some point to donate to someone’s GoFundMe campaigns, either for a funeral, vacation or maybe to cover medical costs. But did you know that you can also crowdfund money to start a business?
There are all types of crowdfunding platforms now. GoFundMe which is the general crowdfunding platform that does a little bit of everything, Kickstarter which specializes in new products and inventions, HoneyFund which originally appeared on SharkTank and specializes in helping newly married couples pay for their honeymoons and of course Inventrify which is the option for community-oriented entrepreneurs looking to start businesses within their community.
Crowdfunding is not easy. It’s a challenge and you have to put together a compelling campaign that entices people to donate money to your cause. You’ll need to focus on the benefits, rewards or incentives that people want and need, but you’ll also need a captivating story…a “why.”
Crowdfunding is a great option that for now goes underutilized but is rapidly growing and I believe it will eventually become the #1 option for entrepreneurs to start their business.
If you’re looking to start a business and need the initial capital to start, make sure to look at all options. There is no one-sized fit all solution because every entrepreneur and every business owner is different, but I do encourage you all to view crowdfunding as a solution.
It truly is the bridge between struggling with debt and Venture Capital.
