The biggest challenge for any start-up is having enough capital to get the dream off the ground, and then have enough remaining to sustain growth.Sounds like good advice? But doing it and talking about it are two totally different things. Entrepreneurs are resourceful people; however obtaining capital can be their biggest challenge. Banks used to be a great source of start-up capital, usually with an equity loan on a home. Now, with the recent real estate crash, most entrepreneurs don’t have enough “room” to borrow money for that equity loan, so most banks can’t be counted on for assistance.Without bank lending we are left with borrowing from friends, fools, and family, or even angel investors. It isn’t advisable to borrow from our friends and family, and angel investors may try to take too much control of your start-up.Enter the new era of crowdfunding. There are hundreds of websites that can raise money for your start-up quickly. Kickstarter and Indiegogo are two of the most popular, but there are many more that may suit your company well.Here’s what many companies are doing on these sites:1. Raising capital for their start-up by getting donors who are just interested in helping. The donors get no stock or promise of returns on their investments. However, they may get a company mug, or some sort of small gift for their efforts.2. Raising start-up capital by preselling their products at hefty discounts with a delivery date of up to nine months. Some entrepreneurs ask for and get up to $25,000 in capital, but some end up getting nothing.For all of you who have existing companies and want to raise money to purchase machinery, or expand operations, there is more crowdfunding help on the horizon. The so-called Jobs Act that was passed in April of 2012 approves crowdfunding for raising equity capital. The rules and regulations are still being written, but sometime in 2013, companies will be allowed to secure up to $1,000,000 by issuing stock. That’s when the game will change. We can foresee this unique platform for many companies who are ripe for expansion, but can’t find the capital from banks or angel investors to make it happen.So please study the various crowdfunding sites. This platform for raising capital may be the wave of the future and be an easier avenue to get your start-up off and running. It will play a huge part in future entrepreneurial success, and help “jump start” faster growth in American start-ups.
The Successful Entrepreneur: Use Crowdfunding for Your Start-Up
August 16th, 2013