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Six Top Crowdfunding Tips for Small Businesses

Posted by appsoftdev on April 21, 2015

Hands holding money

In 2013, the crowdfunding industry grew to be over $5.1 billion worldwide, helping tens of thousands of entrepreneurs and businesses raise the money needed for the development and launch of new products, services and inventions. So successful has the online crowdfunding proven that federal legislators passed the JOBS Act with crowdfunding provisions to assist entrepreneurs, public companies and nonprofits.

But effective crowdfunding takes far more than completing a profile and posting a project on Kickstarter, GoFundMe or Indiegogo. Baker County Chamber of Commerce offers these six top tips for a successful campaign:

  1. Know the difference in crowdfunding types: Until passage of the JOBS Act, crowdfunding sites could be used only to solicit donations and primarily were to help nonprofits and individuals with particular needs. But crowdfunding provisions within the JOBS Act now allow entrepreneurs to solicit investments of up to $1 million annually via crowdfunding websites. Unlike donors, these investors actually own a piece of the company and can realize a return on their investment if the company succeeds.
  2. Know the rules: Crowdfunding isn't a free-for-all for businesses. There are rules that you must know and follow. For instance, The Crowdfund Act helps to lower the cost of raising capital by exempting companies raising $1 million or less from registering their offering with the Securities and Exchange Commission (SEC). But while you're exempt from registration, you remain subject to regulation. Always consult with a professional investment consultant or attorney versed in securities law before launching a crowdfunding campaign. 
  3. Know your options: The Crowdfunding Act requires that investments be solicited via sites that are registered with the SEC. Be sure to thoroughly check out not only your crowdfunding site, but all responding investors. Assure they're legitimate and that potential investors understand all risks involved. 
  4. Create a compelling pitch package: While crowdfunding for donations calls for emotional and passionate pleas, soliciting for investments instead demands a focus on the bottom line and the potential for investors to realize a return. 
  5. Get the word out: Once you've launched your crowdfunding campaign, it's critical that you spread the word via social media posting and sharing of links, information and promotional videos. But don't go about this haphazardly. Consult with a marketing professional who specializes in effective crowdfunding campaigns to ensure success. 
  6. Keep the powers that be updated: When crowdfunding investments, know that the SEC regulates the manner and frequency of communicating with investors. Again, this is where consulting with a securities expert can help assure you remain in compliance.

For more support building and growing your Baker County-based business, consider chamber of commerce membership. Call 904-259-6433 to speak with a membership specialist today.