A Different Way to Fund Your Great Business Idea

BY David Guzman Aug. 24, 2010 35 Comments

Do you have the next million-dollar idea that you are seeking funding for? Do you have a killer iPhone or Android app that you have been waiting to develop? Perhaps it’s the next creative blogging platform that you need a bit of money to bring to life? If you answered yes to any of these questions, then you should take a moment and consider the possibility of crowdfunding to attract buzz, customers, and funding towards your idea now.

What is Crowdfunding?

Harnessing the attention and trust of people who network and pool their money together, often through the web, to support a cause, effort, or business.

In a nutshell, it’s basically solidifying an idea, throwing together an appealing storyline and pitch, and then promoting the heck out of it to potential contributors via social media, viral video campaigns, etc. Best of all, crowdfunding helps you build a customer base on the fly by appealing to a large audience of micro-funders.

Do contributors receive ownership in my business?

Nope. Instead they are often given unique rewards for their financial contribution such as: access to alpha or beta trials, guest tickets to private company events, custom-tailored products and services, and mentions in everything from newsletters to permanent web pages. The really interesting thing about this approach is that the reward tends to change with each new funding effort.

So, where should I go to get started?

Depending on the type of business idea you have, you more than likely have several options. Here are a few crowding platforms that have seen some success:

Kickstarter

This is the place to approach if you have a creative idea or ambitious endeavor. Kickstarter openly states that they are a “way for artists, filmmakers, musicians, designers, writers, illustrators, explorers, curators, performers, and others to bring their projects, events, and dreams to life.” One relatively recent example of crowdfunding success on this platform was that of Diaspora.

It is important to note that all projects must be screened and approved by Kickstarter prior to funding on their platform. Also, you are required to set a funding goal and meet your objective.

IndieGoGo

Although not as notable and widely recognized as Kickstarter, IndieGoGo allows you to start crowdfunding immediately for any project or idea.

One notable difference that sets IndieGoGo apart from Kickstarter is that you keep the money that you raise, whether or not you reach your funding objective.

Kapipal

This is probably the best solution if you are looking to raise funding within your network (whether family, friends, friends-of-friends, colleagues, etc.). Kapipal readily proclaims that they are “for everyone that wishes to raise money for a group purchase, charity, personal project, birthday present, wedding present, and so on.”

For those of you that are working on another project that you’d like to consider crowdfunding, feel free to check out this complete list of options.

What are your thoughts? Can you think of any additional, successful crowdfunding platforms that we didn’t include? Do you have another brilliant nontraditional way to fund a business idea that you’d like to share? Feel free to contribute in the comments below!

Entrepreneurship, Launching Tips

crowdfunding, nontraditional funding

http://www.making-your-own-website.com Nabeel | Create Your First Website

Hi,

Yeah crowdsourcing is a great way to fund your new business idea.

Disapora team wanted $10,000 but they reached over $200,000!

Nabeel

http://moderncommunicator.com David Guzman

Hi Nabeel,

Diaspora is definitely a great example of crowdfunding! While the norm isn’t to receive that much above what you are asking for, Diaspora has really set the bar in terms of what crowdfunding can accomplish.

Thanks for sharing your thoughts,

-d

http://www.firstfound-blog.co.uk/ Andy @ FirstFound

So what do the people submitting the funding get out of this?

http://moderncommunicator.com David Guzman

Hi Andy,

Your comment inspired me to add a bit more information to the post, so feel free to check out the “Do contributors receive ownership in my business section.”

In short, funders receive a variety of incentives, such as: tickets to events, mentions in press releases, custom-tailored products and services, and just about anything under the moon that a small startup can offer to incentivize someone to contribute.

As it turns out, many believe that offering unique rewards is one of the key components of successful crowdfunders.

Thanks for stopping by and commenting.

-d

http://www.dennisedell.com/about Dennis Edell @ Direct Sales Marketing

Massive exposure and lots of goodies….always a crowd pleaser, so to speak. lol

http://moderncommunicator.com David Guzman

Haha, exactly! : )

http://www.dennisedell.com/about Dennis Edell @ Direct Sales Marketing

While I prefer building upon what’s already there, this seems awesome for those with the inventive mind.

have you used anything like this yourself?

http://moderncommunicator.com David Guzman

I have used IndieGoGo with a bit of success in the past. It was a considerable investment in terms of rallying social marketing behind our campaign, but we were able to raise a couple of thousand throughout the course of 6 weeks to rapidly develop an app.

More so than the cash, this really gave us great exposure and additional access to resources through friends of friends.

-d

http://twitter.com/mrtejkohli Tej Kohli

I agree with you, Nice guide who wishing to start business, Its happen sometimes that because of lack of fund can cause we are unable to beat our competitors !

http://moderncommunicator.com David Guzman

Thanks for the compliment and stopping by and commenting.

Insufficient funding is definitely a very hard thing to face and can make attempting to compete with others very challenging,

-d

Sajib

Great post. Those looking for a business idea must find this post very useful.

http://moderncommunicator.com David Guzman

Thanks for your kind words, Sajib.I really do hope that this post will help those that are in search for a way to fund their endeavor.

Best,

-d

http://www.growvc.com valto

You may also be interested in our model for crowdfunding startups. Our model is more community oriented and is based on equity.

http://moderncommunicator.com David Guzman

Thanks for stopping by and reading the article. I will definitely be sure to take a closer look at growvc, seems like you guys have created an intriguing, more transparent model for funding startups.

-d

Shonika Proctor

Ben,

AWESOME resource and right on time as always!! I was just trying to think of the names of one of these cause and project related sites and your post came in. Love it!

@teenbizcoach
http://moderncommunicator.com David Guzman

So glad to hear that this helped you!

Thanks for stopping by to read, comment, & ReTweet! : )

-d
http://www.thefinancekid.com Paras

David…these are good sources to startup and get funds for online ventures.But for blogging i am sure you will need to sweat or swipe Credit cards

http://moderncommunicator.com David Guzman

I agree. This is more of a short-run solution that is helpful for getting your idea off the ground and essentially bootstrapping your business, as opposed to trying to go out and seek venture capital funding.

As far as blogging as business model is concerned, I tend to be an advocate for there being no substitute for your own sweat and effort. To me, Gary Vaynerchuk spells this process out best. : )

-d

http://awkwardchristianity.com Jonathan Romig

Dude. Nice article about funding. Those ideas sound way better than a bank loan and all the hassle that brings.

http://moderncommunicator.com David Guzman

Thanks, Jonathan!

While these ideas can end up being substantially more work than a bank loan, I tend to think that this is a great way to raise development funds while promoting your service or product & identifying a customer base simultaneously.

-d

http://www.crowdcube.com Darren Westlake

Hi,
Good article.
We’re just about to launch Crowdcube – http://www.crowdcube.com – which offers an equity return for people investing in small businesses. Uniquely, the Crowd can invest as little as £10 so we’re empowering anyone to be a business angel.

Another site to take note of is Kiva – http://www.kiva.org – the mother of all crowdfunding sites having raised an incredible $150m+ so far for small businesses in developing countries.

http://moderncommunicator.com David Guzman

Hi Darren,

Thanks for stopping by and commenting. I was just checking out Crowdcube and am looking forward to seeing how it impacts the model of crowdfunding. Interesting to see a company taking this in the direction of offering equity returns.

Best of luck with your effort,

-d

http://www.htmlcrazy.com Mandeep

Hey David,I have never heard of crowd funding. It is a very smart idea to get funding for “your idea” However, it would require some like minded people. Thanks for the great article, very informative!
http://moderncommunicator.com David Guzman

Thanks for stopping by to comment, Mandeep.

Crowdfunding definitely does require a team of like-minded people. Both from the perspective of those working together to raise funds and potential funders. With the rapid growth of this concept in the past 6-7 years, numerous sites have begun to specialize in individual fields that cater to those looking to raise money.
http://www.cofundit.com Cofundit

Have a look at Cofundit!
Cofundit is the first Crowdfunding web platform based on loan financing. Cofundit democratizes investment into Small and Medium Enterprises and supports Entrepreneurs innovative businesses. We offer our Investors not only interesting returns but also transparence in their investment.

http://www.youtube.com/watch?v=1QkHY4Qwtzw

http://moderncommunicator.com David Guzman

I will definitely check it out. Thanks for stopping by and commenting.

-d

http://mt-pockets.livejournal.com/ MtPockets

Seems like a good idea to me – as long as you have an idea that can be easily explained and gets people excited.
I seem to remember crowd sourced loans were supposed to be ‘the next big thing’ but never seemed to take off in a big way. It’s a shame, it was a good idea in theory!

http://moderncommunicator.com David Guzman

Thanks for stopping by to comment. Crowdsourcing in general is an interesting concept and still seems to be spawning creative models that help people across all fields.

-d

http://www.bagsoflove.co.uk/blog/ Gift Ideas Blog

Sounds like a great idea if you think you got the potential to start your own business. That’s great that you suggest different crowding platforms depending on what type of business one would get into. Thanks for this post!

http://moderncommunicator.com David Guzman

Glad you appreciated it! Each site does seem to cater to its own niche, so it’s good to be aware of each prior to using their platform.

Thanks for commenting,

-d

http://www.venturesocially.com/ venturesocially.com

Another option is to use venturesocially.com, our new startup

A founder joins the site and created their pitch and uploads their video. Their pitch can contain information on many aspects of the venture such as the product, marketing, profit and loss, etc.

Once the venture pitch is ready one can then publish the venture. There are a few choices at this point, publish to the world so it shows up on the Discover section of the site.

One can also choose to only show it to your all contacts or a selection of your contacts.

An investor can they browse and understand the venture and reply with questions or directly for a big on investing in the venture. Currently we offer no services in regards to formation and legalities of the actual business transaction; this is where we hope to
expand into in Europe and US

http://moderncommunicator.com David Guzman

Thanks for stopping by and explaining your startup. Always great to hear of additional resources for individuals to crowdfund.

Best of luck to you guys!

-d

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