August 7, 2012
There is a new way to raise the capital needed for a business venture, new product development or idea. The new dog in town is crowdsourcing, also called crowdfunding, and it is a great way to help finance that business venture or idea you have. To be effective and get the most out of this fundraising method, here are seven helpful tips to follow.
Be clear and concise
Make your presentation as clear, concise and direct as possible. Present your idea, tout its benefits, build up the potential and get your investors excited about your idea. Be specific about your industry and how you will tackle obstacles. Show why your idea is a good one and why they should invest in it.
Be brief and to the point
On the other hand, do not be overly exhaustive in the briefing. Be as clear as possible and state your situation concisely. Think of it like an elevator pitch. You get one chance with each potential investor, so state your case clearly and in as brief a manner as you can while being complete and building excitement. You may only have a few minutes or less to make your case before they are off to the next idea.
Arrange a meeting
When you have gathered a group of crowdsourcing investors that are interested, set up a meeting. This does not have to be an in-person meet up; this can be done easily with a video phone call or video conference. Use technology like Oovoo or Skype for this and meet your potential finance partners one on one.
Let investors know in whom they will be investing
List all of your co-founders and/or partners. Tell your future investors about the company officers in whom they will be investing. This gives credence to your credibility, which is vital since the majority of lookers will not personally know you or your partners/co-founders. If you start off being that transparent and honest, trust is established.
Offer an incentive
Make it an opportunity for the crowdsourcing finance community. Many raises (finance raising events) offer a return for investments. For instance, you could offer a 1% revenue share for 12 months on investments of more than a set amount. What you offer is entirely up to you, but I would make it attractive enough to grab interest.
Do not offer too much information
As you make that incentive offer, be careful to not overwhelm your prospective investors. Give them enough information in your prospectus to get them interested, but not TOO much. A simple statement of the product, its impact on the industry and the direction you will take is usually enough to get the job done. You will probably receive ideas in return, which leads to the next helpful crowdsourcing tip.
Stay the course and do not go in different directions – yet
Do not allow investor input to get the better of you. Take it all under advisement and look at that information later. If you see something that looks really great, take action, by all means. The main thrust of this stage of the finance phase is to get your business up and running so you can start showing revenue. You can always tweak things later, after the startup.
If you follow these simple guidelines to using crowdsourcing, you will find that it is possible to gather a substantial group of finance partners and investors. If you get it right (and you NEED to get it right), your crowdsourcing event(s) will be successful and you will attain your dreams.
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