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Can You Kickstart Your Business with Crowdfunding?

29 Oct 2014 | Posted Under Finance
By Carl Weiss
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Can you crowd fund yourself to success? Recent developments in crowdfunding have made this highly lucrative online venue even more popular. Take for instance Zack Brown,"the Potato Salad Guy," who wanted to raise $10 to make potato salad and wound up with $55,000 for his efforts on Kickstarter. In today's still shaky economy, many entrepreneurs are turning to crowdfunding to start or expand a business, especially since the banks have tightened rules regarding business loans. Other creative sorts are simply using crowdfunding to generate income, in and of itself. So if you're interested in learning the ins and outs of one of the hottest commodities on the Internet, read on because you may just be ready t o"go Fund Yourself!"

Many people have used crowdfunding sites to jumpstart new businesses or take existing businesses to the next level.  With a proliferation of crowdfunding sites such as Kickstarter,IndieGoGoRocketHub and more, these sites have given a number of entrepreneurs the chance to fund a pet project or business that would have otherwise languished. 

Let’s face it, banks are not exactly throwing their cash around these days.  Friends and family cannot always be relied upon to have the wherewithal to back your dream. Credit cards, while another opportunity for self-funding, is fraught with many risks, especially since the credit card companies' draconian policies can suddenly ramp up your interest rate to 25% or more.  This is one of the reasons that crowdfunding got its start.

Crowdfunding Can be Music to Your Ears

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While most people think the phenomenon of crowdfunding is an invention of the 21stcentury, its roots can actually be traced back some four hundred years to a time when many publications were sold by subscription before the first copy came off the presses.  However the trend to branch out to other business models is indeed a recent development.  While there is some conjecture as to which website was the first to offer crowdfunding, Wikipedia lists ArtistShare, which started in 2003.  Slanted toward the recording industry, the site was designed to allow recording artists to raise funding in order to expedite the expensive process of bringing out a new album.  (Imagine how Mozart would have jumped at the opportunity in the 1770s to have thrown off the yolk of the church and embraced crowdfunding in order to have artistic control of his career.)

By 2006, there were three more hats in the crowdfunding ring: EquityNetPledgie andSellaband. While Sellaband was another crowd funding brand devoted to the fan funding of recording artists, EquityNet and Pledgie were something else altogether.  Founded in 2005, Equity Net was designed to help startups and existing businesses to raise equity capital from accredited investors.  Used by more than 10,000 entrepreneurs, EquityNet provides access to 20,000 individual investors, including angel investors.  To date it has helped companies raise more than $200 million. was the first site to take crowdfunding to a whole new level by allowing a broad spectrum of entrepreneurs, artists, philanthropic causes and others to use the Internet to fund their project or cause.  Created in 2007 by Mark Daggett and Garry Dolley, the site permits anyone the opportunity to pitch their cause in order to solicit donations.  (The site has a list of 50 categories under which to solicit funds.)

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However, it wasn’t until 2008/2009 that crowdfunding hit the big time with the introduction of such sites as IndieGoGo,KickStarter, and RocketHub.  Whether it was a combination of savvy marketing or just being in the right place at the right time, these three platforms definitely made their mark by raising funds in a big way.  To date, Kickstarter is the current BMOI –Big Moneymaker on the Internet, having raised more than $10 million for smartwatch startup Pebble, along with a number of multimillion dollar funded projects. For a list of the top-10 Kickstarter projects go to

Not to be outdone, IndieGoGo raised more than $2 million apiece this past year for the independent films Lazer Team and Gosnell, the Movie.  They also raised more than a million dollars for a video series called Tabletop Season 3 that is all about tabletop games. To see more, go to:

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Then there’s  While not yet as well-known as Kickstarter or IndieGoGo, this crowdfunding platform begun in January of 2010.  Just like Kickstarter and IndieGoGo, on RocketHub you get to pitch your project, select a funding goal and choose a deadline by which to raise funds.  The chief difference with RocketHub is that if you do not reach your stated goal you get to keep the funds raised minus 12%. (There's an eight percent fee charged for unsuccessful projects plus a four percent transaction fee.)  With both Kickstarter and IndieGoGo, you need to make your strike number in order to collect funds.

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Of course, there are other crowdfunding sites that have joined the fray as well, such as FundRazrFundlyGoFundMe,MicroventuresFundaGeekPeerbackers and more.  Each of these platforms have their rules and regulations, fees and disclaimers.  Before selecting a platform you need to read their rules and regulations.  However, even this doesn’t mean you will be accepted, much less successfully funded.  The bad news is that if you are rejected, it is difficult if not impossible to find out why or what you need to do to meet a site’s criteria since most of the crowdfunding sites do not have a customer service number, chatroom or email address to which funders can respond. The good news is that with all the crowdfunding sites out there, just because you crash and burn on one doesn’t mean you will flameout on another.  (It’s all part of the learning curve.)

Another Look at Potato Salad

As mentioned earlier, recent changes to the rules at Kickstarter have opened the doors for projects that would have previously been turned down out of hand.  Take for instance Zack Brown, "the Potato Salad Guy."  His proposal that sought to raise $10 to make potato salad instead raised $55,492 when it went viral.  (Talk about supersizing your order.)  Not only did Zack’s project not have any definitive objectives, once he raised $55k, he wound up hiring a bunch of lunch trucks to throw a potato salad party with his windfall.  Check out Zack’s project at:

Let’s Go Fund Yourself

I know what you’re thinking … "How do I get some of that salad, the green kind?"  The first thing you have to do is decide on which type of crowdfunding model fits your needs best.  That’s right, this is not a one-size-fits-all industry.  Currently there are three flavors from which to choose:

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  1. Reward-Based Funding – Just as the name implies, while you are not required to give up points or pay back funds raised in this way, you do need to provide something of value (real or intangible) in order to raise funds using this model. Rewards could be anything from having your name written on the closing credit roll to books, t-shirts and/or real merchandise being created for the funds raised. 
  2. Equity-Based Funding – As the term implies in this funding model you are required to give up a percentage of the business or points in a movie. 
  3. Credit-Based Funding – This third model if successful can provide funds that are paid back just as you would a loan. This form of funding can also encompass micro-loans which is another form of crowdfunding that has reached a worldwide audience.
  4. Donation- Based Funding – Donation funding are basically charity based where you ask for donations. this type of funding is available on many social media platforms and can be used to raise fund for what you feel you need help with. It is also one of the primary ways charities raise funds on the web.
Which Crowd Funding Platform is Right for You?

When it comes to selecting the best platform that fits your needs, the first thing you need to do is 
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search the crowd funding site for current and previously funded projects.  See how closely they conform to your proposed project.  Look for failed as well as successful projects and try to determine what went wrong.  Then write up a proposal which, while not plagiarizing that of a successfully funded campaign, closely emulates its format. (Even this does not mean that the project will be given a green light.  It just makes the odds of acceptance better.)

Then comes the fun part; creating your presentation.  This should include visual elements such as one or more videos, photos of your finished product or prototype, photos of you and your team, etc.  The better you convey your project from concept to completion, the better the chance it will resonate with those considering your project. 

In fact, it is this last part of the creation process that is the most important part for successfully raising funds: engaging and activating your audience.

While major crowd funding sites have anywhere from hundreds of thousands to millions of viewers that doesn’t mean that each and every one of them is going to see your proposal.  So if your idea to raise funds is to set it and forget it you could be in for a rude awakening.  Since most projects are restricted to a 30- or 60-day term in which to raise funds, the onus is on you to get the ball rolling fast and early.  This means you need to write your proposal, shoot videos and photos, but you also need to start networking as soon as the project goes live.

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This boils down to having your troops (people in your social networks), in place to hit the beach and start fanning the flames.  Through the use of social nets, email blasts, text messaging, phone calls as well as up-close-and-personal grassroots in your face meetings you need to get your friends, family, coworkers and anyone else you can, convince to not only buy into your project, but get their friends, family and coworkers to do the same.  If you can somehow get a news media person to pick up your story, even better. The beauty of the crowdfunding community is that if you can get the ball rolling, then many times the crowd and sometimes the owners of the funding site will rally around your cause.  If, on the other hand, you think you can simply launch your project and forget it, you’re going to be sadly disappointed.

However, as I mentioned earlier in this blog, just because you crash and burn doesn’t mean that your hopes to raise funds are over.  Lick your wounds, learn from your mistakes, and try another crowdfunding platform to toot your horn.  Who knows, maybe you can use crowdfunding to kick start your business.

If you’d like to find more articles like this, read Carl's new Working the Web to Win Book available on
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