Is Crowdfunding Right For You And Are You Right For It?

Crowdfunding is a creative method used by entrepreneurs, startup organizations, artists, musicians and others to acquire funds. The way it works: A number of individuals pool their money in a collective effort to support the company, organization, artists or charity that’s close to their hearts. Although there are over 450 crowdfunding platforms to date, the most popular platforms are ArtistShare (considered the pioneering platform), KickStarter, IndieGoGo, RocketHub and GoFundMe.

If you are considering crowdfunding as a means to acquire funds for your entrepreneurial endeavor, you will first need to determine which type of crowdfunding is best for you. The options are as follows:

  • Donation: The easiest and most straight-forward approach, donors will simply donate with no expectation of an exchange.
  • Reward: Reward crowdsourcing offers donors some type of non-monetary reward at various giving levels.
  • Peer-to-Peer: Essentially, individuals loan money to you/your organization in increments, with the expectation of being paid back over time. Interest rates are usually lower, and donors usually invest only in brick-and-mortar businesses with an established cash flow.
  • Royalty: With this type of crowdsourcing,¬†donors receive a percentage of the profits once the business begins making money.

While a successful crowdsourcing campaign is a great way to engage with your audience, you will have to spend some time and effort targeting the right audience. Your audience can also provide valuable feedback (free market research), and really compelling products or projects can often receive incredible buzz–a real boon to any business.

The downside to crowdsourcing, though, is that if–for some unknown reason–your product or project does not succeed to make it to the marketplace, you suffer a huge hit to your reputation. If your project involves intellectual property (original songs, music, books, etc.), there is a bit of risk involved in sharing your idea before it becomes mainstream; plagiarism and theft are real concerns in this space of the market. Finally, donors can become exhausted if you have to return to them with another campaign because you didn’t raise enough the first time.

The Carleton Group Management Consultants regularly assist businesses of all types in achieving their goals. Located in Moorpark, CA, these experienced business advisors have been assisting other business men and women for decades. Allow The Carleton Group to help you or your group; call today!