Crowdfunding 101: What You Need to Know

Funding! It’s the fuel that powers your business.

When starting or growing your business, it is often necessary to acquire capital to help get things done. Attaining this funding is often accomplished through loans (convertible into equity or non-convertible), angel investors, venture capitalists, and taking on one or more partners. In addition to these options, the concept of crowdfunding is gaining considerable popularity for raising capital needed by businesses.

This can be a very effective way of getting the money that is needed, on terms that are acceptable to you and your business. Since crowd funding typically raises smaller amounts of money from a larger number of people, it can be possible to obtain more favorable terms, which is important for a business. If you’re considering this option for your business, there are some things you need to know.

Choose the Right Platform

There are dozens of different crowdfunding platforms out there from which to choose.  So finding the right one is essential. Some of the more popular options like Kickstarter and Indiegogo are great for many new businesses, but might not have the flexibility needed for larger investments. Researching each option to find the one that best meets your specific needs is well worth the effort.

Customize Your Presentation (Understand Your Audience)

Many businesses make the mistake of thinking that because they are using crowd funding that they don’t need to put a lot of effort into their presentation. The fact is, however, that investors have so many options for investment that they can afford to be picky. To help attract those who may be interested in funding your business, it is essential to develop a powerful presentation to show why someone should offer you their money.

Have a Strong Business Model/Plan in Place

Somewhat related to creating a good presentation is having a strong business model in place. It is often new or small businesses seeking funding, and they may not have a good business plan in place. While some businesses are successful simply through hard work and a good idea, it is going to be difficult to attract funding if there is not a clear model in place. This will help show why the money is needed, and what it will be used for.

Be Prepared Legally

Perhaps the most important thing that needs to be done is to have everything handled correctly when it comes to the legalities of the funding. Anytime you are raising capital in exchange for equity or other benefits there will be regulatory steps that need to be taken. It is also important to ensure the rights and responsibilities of all parties involved are clearly listed in the contracts. Having an attorney help with this process is the best way to avoid any complications. Contact the Law Office of Philip P. Crowley to discuss all your options.

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