The recent Entrepreneur Access To Capital Act is music to the ears of entrepreneurs looking for funding for their small business. The law, which was passed by the House and is awaiting sign-off by the Senate, is designed to help startups tap sources of capital other than banks, venture capital and angel funds by using crowdsourcing. Beyond trying to raise capital, crowdfunding opens the door for many avenues of promotion, says Slava Rubin CEO of IndieGoGo.com, the first and world’s largest open crowdfunding platform founded in January 2008. “By making an impassioned pitch to the people in your network and beyond, you are able to put yourself out there and discover what opportunities and resources might come your way,” he explains. “Small businesses should consider this modern technology and take advantage of how it has helped millions achieve their goals.”
To date, IndieGoGo.com hosts some 40,000 campaigns from 200 countries and was selected as part of President Obama’s “Start America” campaign. “Anyone in the world can use crowdfunding to fund any passion or business idea,” Rubin says.
The components of a successful crowdfunding campaign are:
- 1) To have a good pitch, which means engaging video and copy.
- 2) To offer perks such as a discount, exclusive or limited edition.
- 3) To be proactive by sending out personal emails, using social media, and targeting influencers in organizations, on YouTube, and the blogosphere.
- 4) To have an audience that cares—an inner circle of friends, family, and fans or customers.
- 5) To keep the updates coming. Have at least one update a week to keep a campaign fresh. Typically, 13 or more updates lead to 60% more money raised than campaigns with only 5 updates.
As it relates specifically to small businesses optimizing crowdfunding, Rubin says crowdfunding can be used for presales to demonstrate product demand. “Usually when you are looking for bank funding or venture capital to start your business, you need to prove that you have a solid, profitable idea,” says Rubin. “With crowdfunding you have the opportunity to prove there is a need and demand for your product. People who believe in your idea will fund your venture.”
Crowdfunding also allows you to test your marketing strategy. With Twitter, Facebook, creative video, and emails, you can easily and readily test your marketing message and approach on your target market, Rubin says. Furthermore, it enables you to gather customer data and information, he adds. “Once you create a campaign page, you have direct access to your customers. You can monitor who is buying your product, which is useful for fulfillment, future marketing, and engaging your customers.”