Explore a modern way to fund your business in crowdfunding
Crowdfunding is a newer form of funding that puts some excitement into raising money for new products and/or business ideas. This kind of lending allows for the account creator to gain funds by asking for the support of family, friends, and fans.
Websites like Kickstarter.com and GoFundMe.com have gained popularity due to their use of short-term, or one-time, funding. Crowdfunding can be reward-based or equity-based, depending upon your business’ funding needs.
Types of Crowdfunding:
-Reward based-
Small business owners solicit financial donations from individuals in return for a product or service. Essentially, you’re pre-selling items that are not yet manufactured. This creates a liability to deliver in the future.
-Equity based-
People invest in private companies, not listed on the stock exchange, for a percentage of ownership in that company.
Pros of crowdfunding your business:
- Low cost of raising capital and you typically maintain control of your business,
- Through reward-based funding, you can build a customer base before you launch your product, or
- Through equity-based funding, you can get diversity in equity structure, spread out control, and as the owner you still have decision authority.
Cons of crowding your business:
- Crowdfunding may not result in enough capital to meet your development needs,
- You’ll need to invest time and resources to develop a strong campaign, and
- There’s a high risk for investors, which can make it difficult to get buy-in from an investment pool community.
What are some alternatives to crowdfunding?
Click here for three more ways to fund your business!
