Startup Crowdfunding is Here

Original post by Ernest Grumbles III via Startribune

If you have a great idea – whether in the creative, charitable or entrepreneurial vein – where do you get the money to launch?  You can pull from your own pocket.  And most do – at least to get things going initially.  Companies like Medtronic and non-profits like CaringBridge started at least initially with founder resources.  But unless you’re wealthy, this often can only get you so far.  Sometimes you need to scale fast – in response to competition or market demand.  You could ask friends and family, the usual next step.  Again, whether this is viable depends on the kind of friends you have.  Banks?  Only if you have a going concern?  Angels or VC’s?  Yes, if you have a track record or are an amazing networker (assuming the idea’s good enough).  IPO?  Only when you’re already in the market and successful.

Of course, the non-profit sector has been able to engage in large-scale public fundraising for a long time (through online campaigns).  And you can go on Facebook now and appeal to your social network to support a charitable initiative.  There are also platforms such as IndieGoGo, StartSomeGood and others that allow you to seek donations from the general public through social media.

The most well-known crowdfunding platform, Kickstarter, has an amazing story.  Originally focused on creative projects (films, plays etc…), it’s expanded to include product development.  I had a client, Peak Design, that raised over $300K for the launch of its Capture Camera Clip (released last summer, now sold worldwide).  One game company raised over $3M to fund development of a new videogame.  Notably, these are not equity investments.  You contribute for designated benefits, usually the good in question, plus fun stuff like t-shirts or product add-ons.  Basically you’re pre-selling your product to fund its finalization and market release.  Brilliant strategy.  Market test, complete R&D and take the first large orders all in one.