There are many reasons why people strike out and start a business. Some entrepreneurs have been spurred on after being laid off, others hate the grind of 9 to 5, some simply want to supplement their income, while others have a great idea that they want to take to market.
No matter the reason why they get started all entrepreneurs, everyone needs capital to get their startup started.
Like the thousands of reasons why they started, there’s equally as many ways to get funding. One of the most popular, due to the big TV hits like Dragons’ Den and Shark Tank is Venture Capital and while that is an option, there are others as well.
Have you ever hear of “crowd funding?”
Crowdfunding is a way for start-ups to join a club of sorts that focuses on business. There is generally an initiation fee and in return for money, to fund your start-up, they receive points that can be redeemed for your products and/or services you provide.
There are all sorts of crowdfunding and all sorts of rules and regulations associated with them. Make sure you find the best one for you.
Crowd Funding for Start Up Company
By Yuan Yudistira
Start-up companies cannot offer the crowd equity in exchange for their financial support without filing with the SEC. Therefore, crowd-funded ventures are designed to be membership organizations. For example, a $50 donation will get you into the club, under the agreement that the crowd will be given a chance to vote on business decisions. In addition, the crowd is rewarded with points that are redeemable for products in place of profits. Crowd funding for start-up companies is basically a fan club that is centered on the business.
Primarily, crowd-funding projects open up new opportunities. As a company, you will be able to communicate more directly to your contributors and cut out all of the intermediaries, especially for specific projects. In addition, you will also be able to liquidize objects that are more abstract.
The Difference Between Investors and Contributors
Crowd funding is a completely different model for financing a start-up. With crowd funding, there is a different sort of relationship between the person paying the money and the entrepreneur with the idea.
With most, yet not all, crowd-funding sites, start-ups keep total ownership of their projects. Contributors are rewarded with credit on a website, commemorative t-shirts, free subscriptions or software copies, and more. The biggest difference here is that there are no stock certificates, no Board of Directors, and no equity to pay.
While crowd funding does give the funding that they need, start-ups funded this way may miss out on some things that investors have to offer, including business advice and connections. In order to get investor backing and to take advantage of their connections, you typically need strong connections in the first place. This is just one more reason that the Internet is the ideal way to raise money through crowd funding, because it is so easy to make connections online.
An Alternative To Business Start-up Loans
Naturally, every entrepreneur with a dream and a business plan thinks about taking out one or more business start-up loans in order to get his/her idea up and running. Aside from the obvious risks, many people think that there is no good reason that is preventing them from taking out a business start-up loan to get the money that they need.
Borrowing money through a business start-up loan is dangerous enough to get even the most dedicated entrepreneurs nervous. If it all works out in the end, that is awesome. If not, however, you may be in big trouble. Before you know it, you will be swamped with personal debt, insolvency, or possibly even bankruptcy.
Business start-up loans can give you a huge leg up when you start out, but if you can get around taking out a business start-up loan in the first place, then you should try an alternative strategy.
Again, not every crowdfunding group is right for you. It takes some research and time to find the group suited to your needs and specifications but in the end, it may be a worthwhile investment.
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