SEC OKs peer to peer fundraising for small businesses. Are you ready?
It's a whole new world for small businesses and startups. As a small business you can now launch your own crowd-funding campaign to attract investors.
This is exciting for small businesses because peer to peer funding is a growing and relatively inexpensive way to raise money (and brand awareness) for your business.
This field of investment is relatively new. But there are comparables in other fields. Take Kickstarter for example: since it launched - 11 million backers have pledged more than $2.4 Billion dollars in projects.
What do the numbers tell us?
- Only 34% of projects were fully funded
- Most funded projects sought between $1,000-$9,999 in funding
- 78% of projects that raised more than 20% of their goal were successfully funded.
So, most crowd-funding projects fail. How do you overcome and succeed?
1. Set a realistic goal - as referenced above, most successful projects raised between $1,000 and $9,999.
2. Don't start with $0! Even if you have to give yourself money - find some "lead investors" to get you on your way. You're more likely to reach your goal if you start the campaign with >$0.
3. Make sure your ask is clear and your value proposition is clearer: e.g. help us purchase a new server to grow our business. Your investment of $100 will help us reach 1000 new customers.
4. Have a video: According to Indigogo campaigns with a pitch video raised 4x more funds than those without. We're a visual, mobile culture and video is the way to go to generate interest and excitement. Make sure you keep your video to under 3 minutes!
5. Have a team - there's a reason it's called the social web and we use phrases like "going viral". Having requests from non-overlapping networks means you can expand your reach and secure investors from all over.
So, think your business could benefit from a crowdfunding strategy to secure additional investment? Let us know.