How to Raise Money for your Business
Are you looking for money to start a new business or to expand your existing business through fund raising? Learn how to raise money for your business without applying for a loan.
As an entrepreneur, there may well come a time when you want to raise money for your business. And quite often, you don’t want to take out a loan or give away valuable equity. One solution is to start an online fundraiser that meets the type of business you have and your requirements.
Know what funding method is correct for you
There are a number of fundraising or also known as crowdfunding websites that help you raise money for business endeavors. The main difference between these sites is the funding method that is used, the function that they serve and the fees levied.
Fundraising sites are either ‘keep-it-all or all-or-nothing’.
Keep-it-all model: This is where you keep all of the money you raise irrelevant of if you meet your financial aim. It’s best to use keep-it-all if you can go ahead with the planned project or task even if you don’t reach your objective. For example, let’s say Mary runs a flower shop and she wants to raise $12k to expand her collection. She decides to use the keep-it-all method because even if she only raises $5k, that will still allow her to expand, although on a more modest scale.
All-or-nothing model: This model returns money to donors unless you reach your full financial target. All-or-nothing should be used if you can’t progress without meeting your target. Let’s say James wants to launch a new android app and needs $4k. There’s no point in him raising just $500 as this won’t cover the basic costs – he either needs the entire lot or nothing.
Once you know what funding method is correct for you, the fundraising website you select will also be based on the function that the website serves. There are fundraising sites that cover a lot of things from creative projects to mobile phone apps and everything in between. There are also sites that have a separate category for every type of venture.
Check out the fees, the look and feel of the site, its community and make a call as to what you think will work best for you.
The Crowdfunding Industry
Collaboration on the web is an area of rapid growth. Crowdfunding, or collaborative funding through the web, is one of the standouts for growth in this evolving collaborative economy.
Some of the most interesting developments in crowdfunding, which are expected to develop in the months and years ahead, include:
Investment crowdfunding (becoming a shareholder in a company)
Localization (funding focused on participants in specific cities and neighborhoods)
There are 2 main types or models of crowdfunding.
Donation-based funding: The birth of crowdfunding has come through this model, where funders donate through a collaborative goal based process in return for products, perks or rewards.
Investment crowdfunding: This is where businesses seeking capital sell ownership stakes online in the form of equity or debt. In this model, individuals who fund become owners or shareholders and have a probability for financial return, not like in the donation model.
Which crowdfunding site is best for you?
Here is a list of some of the crowdfunding sites that have different models and focuses. This list can help you find the right place for your crowdfunding goals and requirements.
Kickstarter is a site where creative projects raise donation-based funding. These projects can vary from new creative products, like an art installation, to a cool watch, to pre-selling a music album. It’s not for businesses, causes, charities, or personal financing requirements. http://www.kickstarter.com/
Indiegogo approves donation-based fundraising campaigns for most anything from music, hobbyists, personal finance needs, charities and whatever else you could think of except for investment. They have had international growth because of their broad approach, flexibility and their early start in the industry. http://www.indiegogo.com/
Crowdfunder is the crowdfunding platform for businesses, with a growing social network of investors, tech startups, small businesses, and social enterprises. Crowdfunder offers a blend of donation-based and investment crowdfunding from individuals. http://www.crowdfunder.com/
Rockethub powers is a donation-based funding for a broad variety of creative projects. What’s unique about RocketHub is their FuelPad and LaunchPad programs that help campaign owners, potential promotion and marketing partners connect and team up for the success of a campaign. http://www.rockethub.com/
Crowdrise is a donation-based funding for Causes and Charity. Crowdrise attracted a community of do-gooders and fund all kinds of inspiring causes and needs. http://www.crowdrise.com/
Somolend is a site for lending for small businesses in USA, providing debt-based investment funding to qualified businesses with existing operations and revenue. Somolend has partnered with many banks to provide loans, as well as helping small business owners bring their friends and family into the effort. https://www.somolend.com/
If you want to build the next new mobile app and looking for donation-based funding to get things off the ground or growing, then check out appbackr and their niche community for mobile app development. http://www.appbackr.com/
If you’re a tech startup with a shiny lead investor already signed on, or looking for Silicon Valley momentum, then there are angels and institutions finding investments through AngelList. The accredited investors and institutions on AngelList have been funding a growing number of select tech startup deals. https://angel.co/
You might want to build your own crowdfunding community to support donation-based fundraising for a specific group or niche in the market. Invested.in is a Venice, CA based company that is a top name “white label” software provider, gives you the tools to get started and grow your own. http://invested.in/
If you’re an inventor, maker, of some kind then Quirky is a place to collaborate and crowdfund for donation-based funding with a community of other like-minded people. Their site digs deeper into helping the process of bringing an invention or a product to life, allowing community participation in the process. http://www.quirky.com/
These 10 crowdfunding websites cover most campaign types or funding goals you might have.