Is Crowd Funding a Good Source of Start-up Capital?
How is crowd-funding an adequate source of capital?
People may make the decision to crowd-fund a business because they want to take advantage of the advantages of marketing a business to a large number of individuals.
However, it is important to understand the risks and be sure the person you are going to give money to has the cash flow and the business expertise to pay you back. Then you have to keep in mind that most crowd-funders are offering goods or services which are inferior to the products or services they may offer to you.
You might be asked to contribute to a business with “go here” buttons and are expected to write a check or pay via PayPal if you have a credit card.
Is crowd-funding a good capital source for entrepreneurs or new small businesses?
Crowd-funding sites such as Indiegogo are considered the lowest common denominator among investors. They make it very easy to get started and encourage you to tell your story to the crowd. Make no mistake about it – you probably won’t raise enough money to start a venture such as going live as one of the new casinos 2021 has brought into the market, but if you have an idea then it’s a good way to get it funded.
Our Tale of Two Cocoa
As some of you may know, one of our successful creators in the April 2017 Crowdfunding Landscape is Loren Griffis of Lithium FC, who was successfully funded in only eight days of their Kickstarter campaign. They set out to develop an original line of solar-powered personal acoustic generators, and a new form of musical instrument.
Some of the highlights from Loren’s campaign:
He reached 2x his goal in 15 days.
In 16 days they hit 4x their goal.
Less than 24 hours into the campaign, they were up to 6x their goal.
20 days in, they hit 7x their goal and 8x their first day’s goal.
But there’s more! In only 8 days, they’d raised over 30% of their goal.
Loren also captured some amazing photos with his drone in the March 2017 Crowdfunding Landscape, and offered an amazing “early-bird” rate of only $8 for their 2 USB batteries, which was a 33% savings over the regular pledge price.
Loren went on to nearly double their goal in a matter of days. In order to give you an idea of the early-bird perk, here’s what it looked like:
$8 for 2 extra batteries is 33% off the original pledge price. In just 8 days of the campaign, Loren had raised $800. This means that if all pledges had been at their initial pledging levels, he would have raised $1800.
Some simple math says that if every pledge was at the new incentive rate, he would have raised over $12,000. At that rate, he would have been more than 2/3 of the way to his goal in just 8 days. And because they were able to raise over $12,000, he was able to offer additional incentives. In the end, Loren successfully raised $280,000 with over 1,000 backers.