These days if you’re a start-up business you don’t go to the bank, you go to a crowdfunding service and hope for the best. That’s great, as it makes big ideas happen, and is even better if you are looking to take a stake in an exciting new business venture — but what should investors expect as they explore crowdfunding? In a sense the song remains the same: just as business investors always have we continue to seek strong business ideas, commitment and strong leadership before we dive in, but in the democratic new crowdfunding age you should be aware of some big differences in what to expect from your potential investments:
DIY entrepreneurs
Many of the firms you’re looking at may be run by individuals full of good ideas who lack previous business experience. Given the nature of the crowdfund drive for innovation, you shouldn’t be too put off — look instead for creative, flexible thinking and the capacity to change or tweak the original business idea in response to feedback, perhaps gathered during the crowdfunding campaign itself.
Networking
People seeking funding will leverage their existing network. Part of this may involve people running projects you’re considering taking an investment in putting together pitches and supporting materials of a more personal nature than you’re usually exposed too. Don’t be put off: it’s a good thing. You see, such personal appeals suggest those behind the project are working hard to mobilize and extend their own network with such personal connection. Given so much of the cash raised through crowdfunding comes from friends and family, projects that make such personal appeals may be worth a closer look: they may be doing the right thing (assuming the business has legs, of course).
Sector trends
At present most successful crowdfunding projects appear to be in the technology, fashion and video production sectors. That’s not to say they’re the only investment games in town — there’s lots of ideas out there and beyond the now-standard business start-ups you can find crowdfunding services specializing in social enterprise, alternative energy, and more standard business investment/loans for existing businesses. In other words, crowdfund finance covers all sectors. This will change, of course, as entrepreneurs from outside these early stage sectors begin to take advantage of the crowdfund opportunity.
Platforms matter
How did you make the money you hope to invest? Did you follow the crowd or did you pursue your own original ideas? If the latter then are you certain that investment via the bigger crowdfunding services is the right way to find the kind of business you seek to take position in? Research the existing crowdfunding platforms — and read this site, as that’s what we do. Connecting to the platform that’s most likely to be used by entrepreneurs you hope to find should make it easier to find the perfect investment.
Get familiar
Don’t just rush to invest — take your time and learn how the systems work. Learn from other campaigns: Take a look at the most successful campaigns: how were they written, what rewards were offered? How did they interact with backers? Speak to people: Speak to those who have run successful campaigns (and read the interviews with such people we publish here). What worked? What didn’t? How would they do things differently? Any tips? After all, understanding the mind of people seeking funding should help you identify the traits of the strongest entrepreneurs, before you invest. Tip: Campaigns that gain 30 percent of their funding goal in the first week are more likely to succeed. Crowdfund seekers know this, and that’s why they’ve usually got their supporters lined up before they begin their campaign. If you’re looking for strong ideas with strong supporting networks, look at how long a campaign has been running and how much of its goal it has achieved in that time. We wish you huge success as you make or attract investment using crowdfunding networks and we do hope you contact us to share your stories, successes, failures, tips and suggestions to help others find success through crowdfunding.
Photo credit: Caleb Roenigk / Flickr
