Crowdfunding 101

Have you exhausted the bank loan avenue? Tired of knocking on the doors of venture capitalists and angel investors? Do you need money to grow your small business but don’t know where else to look?

Enter: crowdsourcing! Crowdsourcing is the latest, greatest thing since sliced bread, kids. It allows ordinary people to invest in small businesses and startups!

Okay, my false commercial voice is done. If you haven’t heard of crowdfunding, it’s worth a look. With crowdfunding, a company can post a project that it wants to raise money for (even something like actually get its products into production). It sets its financial goal and then spreads the word. Regular, everyday folks like you and me can invest at little as $5.

With some crowdfunding programs, the company has to pay back the money, but most of them simply require the company to give investors a perk of some sort, such as the product it’s producing, or a t-shirt or other thank you gift.

Rocky Ground in Canada

I’m in the U.S., where crowdfunding is about to skyrocket, thanks to President Obama recently passing the Jumpstart Our Businesses Startup Act, which frees up the regulations around who can invest in a company (they no longer have to be accredited investors). Unfortunately, things are a little stickier in Canada. There are efforts being made to make crowdfunding easier where you are up north.

That being said, you still can invest in companies, and, depending on the requirements on a given site, get funding for your company. Here are some of the most popular crowdfunding websites:

Tips for a Successful Round of Crowdfunding

If you decide to raise funds this way, these tips will help maximize your chance of meeting your goal.

1. Remember that some sites won’t fund you unless you raise the entire amount, so set your goal realistically.

2. It’s your job to tell your contacts about your crowdfunding project! Spread the word on Facebook, Twitter, your website, your blog, email, etc.

3. Provide as much detail as possible in your profile. People who don’t know your company at all may be interested in funding you, but they want to know what your product is, how it works, etc. Provide videos, photos, links, anything that further sells you to potential investors.

4. Send updates to backers. You have the option to send emails to chart your progress in your fundraising to those who have contributed to your cause. They like that. Keep them in the loop and encourage them to tell others about you.

5. Send a thank you. Even if you’re not required, find a way to add value to investing in your company by providing products or other items people would actually like to receive (note: no notepads or lame pens).

Susan Payton is the President of Egg Marketing & Communications, an internet marketing firm specializing in marketing communications, copywriting and blog posts. She’s written two books: 101 Entrepreneur Tips and Internet Marketing Strategies for Entrepreneurs, and has blogged for several sites, including The Marketing Eggspert Blog, as well as Mashable, Small Business Trends, CorpNet and Lead411. Follow her on Twitter @eggmarketing

Photo: Francis Storr on Flickr

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