Crowdfunding Your Startup: 10 New Websites Put Cash in Your Company | Finance from AllBusiness.com
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Crowdfunding Your Startup: 10 New Websites Put Cash in Your Company

Whether you're a startup or an established business, these 10 new websites are creating great alternatives to the traditional VC or bank financing.

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If you've been looking for funding, this is a very good time to be alive.

Yes, I know that banks are not lending and venture capital is hard to find. But I'm talking about a brand new way to raise money for your business. A way that was never available before and that is quickly transforming small and medium-sized businesses.

Social funding, (also called "crowdsource" funding or just crowdfunding) is taking on a life of its own and redefining how small businesses raise money for startup or growth. New crowdsource funding websites are popping up like dandelions in springtime.

Much has been written recently about KickStarter.com (like this great piece by AllBusiness writer Carol Tice), so I'll skip Kickstarter. Here's a quick look at my other favorites:

  • 40Billion appeals directly to the startup entrepreneur who is seeking capital from friends and family. If you're an only child, don't worry -- 40Billion has managed to connect with both Facebook and LinkedIn to make you part of the larger social "family." The site promotes "loans and gifts" although in my review I found some entrepreneurs offering equity (stock) in their companies. (Selling stock online is not legal, however, and I expect the practice will not continue long). There is also a "score" given to each entrepreneur / applicant. Pay attention to this score, since investors will certainly be watching!
  • PeerBackers offers "anyone with an idea, project, business or invention" a way to tap crowd funding. The site coordinates donations or gifts from funders and the "rewards" offered by entrepreneurs. This is an exceptionally easy to use site, although I don't immediately see how it is different from Kickstarter.com.
  • ProFounder is working within the federal fundraising laws to do something really unusual -- offering a percentage of your future profits to your investors. Although this is not actually "stock" in your company, there are legal limits -- and some forms -- required by state and federal law. ProFounder helps you stay within the law, invite funders to participate, and distribute the profits quarterly.
  • IndieGoGo is a truly global funding market with projects and investors in 163 countries. Although they tend to emphasize "projects" that have a social benefit, there is plenty of room for for-profit enterprises. If you have a tax deduction available for investors, this platform will help you promote that, too.
  • InvestedIn has everything from a beauty queen in need of pagent fees to a social network looking for marketing dollars. Like most crowdfunding sites, this is a gift / reward site.

Also of note:

  • WebEquity manages to sneek around the legalities of offering stock by pairing entrepreneurs with "sweat equity" workers. Most requests on this site are for Web or app developers, but the concept could apply to any skill set.  Need a CEO? How about a great sales person? WebEquity can match your need with someone willing to work for stock. Others in this space include GoBigNetwork and Foundrs.
  • Cofundit is a European effort. (But remember, money and good ideas know no borders!) By putting a formal evaluation step into the process, cofundit takes a major step toward quality assurance. This is an important step for investors, and it helps explain why the companies seeking money on cofundit are looking for $200,000 to $500,000 or more! Other European sites include WiSeed, which you can review if your French is better than mine.

Whichever site you choose, think of crowdfunding like social networking. If you are on FaceBook, it doesn't mean you can't also be on LinkedIn. For a serious fundraising campaign, join several of these sites to reach the maximum number of funders.

But -- also like social networking -- remember to hit up your friends. You've got to build a crowd for crowdfunding, and getting your friends inolved is a good start.

Dedicated to your profits,

David


PS: I am a business owner just like you. I'm also a fundraiser and social networking maven! If you're looking to raise money for your business, visit my website where readers of AllBusiness.com have a special page and exclusive access to free business finance resources. If you like what I write, please leave a comment below or contact me.

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