WomensNet News

November 29th 2012

A Way to Fund Women Start-Up Businesses

Opportunity for your woman-owned start-up business is just a website away. We are awash in opportunities, thanks to “crowdfunding” andthe government’s approval for the practice ofcrowdfunding in the United States. Have you heard about this? If not, you could be missing out on a great way to find financing for a new product, business or creative endeavor.

Congress and President Obama enacted the JOBS Act, which includedcrowdfunding provisions, in April. Crowdfunding basically entails asking a crowd of people to donate money to your project. There are a variety of crowdfunding websites where you can submit your proposal that outlines your project, your deadline, what rewards you may offers to your donors, and your fundraising goal amount.

Benefits of crowdfunding

Small investments work: The great thing about crowdfunding is that it can make it easier for women-owned businesses to find money. Instead of requesting thousands from a few wealthy contributors, you can draw small amounts, potentially as little as $1, from a large number of people. Because the donations can be much lower, people are more willing to support you.

Low-risk for donors: Crowdfunding is relatively low-risk for donors. For one thing, they probably don’t have a large chunk of their savings involved. On many crowdfunding sites, if you fail to meet your fundraising goal by your deadline, the donations will revert back to the donors. This means that if they support your effort, but no one else does, they won’t lose their money. Some sites do have a “keep-it-all” model where creators get the money either way, so it’s important to read the guidelines before participating.

You still own your work: The big perk for you is that unlike traditionally large investors, these people really are donors, rather than investors. They will not be financially rewarded, nor will they own a stake in your business or product rights. That will belong to you. Many websites offer opportunities for you to offer a reward to donors – most often that will be a copy of the CD you made, the toy you invent or something of that nature.

Where to find crowdfunding opportunities We’re awash in crowdfunding sites just now. There are a variety of platforms available, but here are a few you might consider.

Kickstarter: This funding platform is for creative projects – films, games, music, art. The site launched in 2009, and more than $350 million has been pledged by more than 2.5 million people. A look at statistics on the site shows about 44 percent of projects are successful in their fundraising goals.

RocketHub: This international community has helped thousands of artists, scientists, entrepreneurs and philanthropists raise millions of dollars. If you want to proceed cautiously with crowdfunding, this is probably one of the safest sites to use. RocketHub actually testified to Congress about crowdfunding and has since also published a whitepaper about the future expansion of crowdfunding in the United States. Alon Hillel-Tuch, founder and CFO of RocketHub, believes “social funding is going to dominate the online space for the next five years,” according to a Forbes article.

We Funder (business start-ups), Startup Addict (no niche needed), Quirky (inventors), New Jelly (arists/films), Cofolios (small local biz) – the list goes on and on.

Tips for crowdfunding campaigns

Get an early start: Before you set up your project on a crowdfunding site – which will require a deadline for fundraising – try building some support on social media beforehand. If you can get commitments for about 50 percent of the project before you ever put up your proposal, you’ll be more likely to succeed.

It’s all in the marketing: As with anything, it’s all in your pitch. Make sure the video you make to introduce your campaign captures your passion and vision. Convince people that this is a project that is going somewhere. Remember: Creativity sells! The more unique you are, the more attention you’re likely to get. If you tell a great story about why you’re pursuing this goal and win people’s hearts, you’re on your way.

Get social! As noted earlier, crowdfunding works best when used in concert with social media. Work to build support on Facebook, Twitter and so forth. If you’re not a social media user, you will struggle to build a successful crowdfunding campaign. If you’re not taking advantage of social media, now is the time to get with the program – crowdfunding or not – as it is a top business marketing tool these days.

Help your supporters: Give your supporters the tools to fully back you. One suggestion is to provide emails or posts they can give to their own friends to expand your network of support.

Work really hard: Crowdfunding and building social media support take work. Don’t expect it to be easy. You need to invest time, energy and creativity if you want to see it pay off.
Kevin Lavelle, CEO and Founder of Mizzen+Main, an apparel company took advantage of crowdfunding when invited to do so. In a Forbes article, he recommended that you consider these questions before pursuing crowdfunding.

  • Is this the sole method of sourcing capital for your business or a part of your overall strategy?
  • Are you using crowdfunding for a specific initiative or to build your entire business?
  • Can you handle the increased demand for your products if your campaign takes off?
  • Will you be able to fulfill the rewards or perks you are offering to those funding your business?

Lavelle points out that it is important to understand the rules of the crowdfunding platform you use, and the ins and outs of the perks being offered to donors. Be sure your business can meet whatever incentives are offered.

If you’re a young woman-owned company, crowdfunding can be a fantastic opportunity because it does not require you to give up your business equity. And while building your support for your funding, you may be building a following for your business, as well.

The SEC is examining crowdfunding, and there are more changes likely to result. So be sure to keep an eye on the regulations as they surface, and be well-versed in the crowdfunding platform rules so that you can make the most of the opportunity to win capital without finding yourself in a difficult position.