Monday, October 1, 2012

How To Crowdfund

Crowdfunding, getting investments and donations from individuals via the internet, has taken off, giving individuals who have, until now, been shut out of funding markets access to much needed cash. It will especially help socially responsible individuals and those seeking to fund socially responsible projects. These are exactly the types of projects that have had an extraordinarily difficult time raising capital in the current economic downturn. 

In my new book on crowdfunding (The JOBS Act: Crowdfunding for Small Businesses and Startups, published by Apress) I discuss how to raise money online. For those with an interest, let me offer a few hints.

1. In my book, I use data provided by GoFundMe, a crowdfunding website, that shows the average successful campaign initiator had 482 friends on Facebook. This suggests that successful campaigns will bring the first part of the crowd with them. Here’s what I think is going on. Your friends and family don’t have to fund your entire campaign, but they must vouch for you. Your Facebook friends provide social data that validates your identity and your character. It turns out that this social media provided validation is critical to any crowdfunding effort. The bottom line:  crowdfunding is about the crowd, and you must have at least the beginnings of one to be successful.

2. Modesty pays. On average, GoFundMe campaigns raised $1,126.00. This is a modest amount. It is very unlikely that you are going, like Pebble Watch, to raise $10 million online. You might, but is is unlikely. The bottom line: start small.

3. Certain types of solicitations work. On GoFundMe, Medical, Education and Volunteer projects make up 47% of projects on the site. Other crowdfunding websites have different focal areas and specialties. Do your homework. Review all of the major Crowdfunding websites. Bottom line: make sure you post your project on the right site.

Of course, these are just hints. Crowdfunding is complicated. It requires discipline and skill.

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I'll have more to say about crowdfunding at our webinar on How to Crowdfund. To register, go to:

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