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crowd funding

If you’ve been looking for funding, this is a very good time to be alive.

Yes, I know that banks are not lending and venture capital is hard to find. But I’m talking about a brand new way to raise money for your business. A way that was never available before and that is quickly transforming small and medium-sized businesses.

Social funding (also called crowdsource funding or just crowdfunding) is taking on a life of its own and redefining how small businesses raise money for startup or growth. New crowdsource funding websites are popping up like dandelions in springtime.

Much has been written recently about KickStarter.com (like this great piece by AllBusiness writer Carol Tice), so I’ll skip Kickstarter. Here’s a quick look at my other favorites:

  • 40Billion appeals directly to the startup entrepreneur who is seeking capital from friends and family. If you’re an only child, don’t worry – 40Billion has managed to connect with both Facebook and LinkedIn to make you part of the larger social “family.” The site promotes “loans and gifts,” although in my review I found some entrepreneurs offering equity (stock) in their companies. (Selling stock online is not legal; however, and I expect the practice will not continue long). There is also a “score” given to each entrepreneur/applicant. Pay attention to this score, since investors will certainly be watching!
  • PeerBackers offers “anyone with an idea, project, business or invention” a way to tap crowdfunding. The site coordinates donations or gifts from funders and the “rewards” offered by entrepreneurs. This is an exceptionally easy to use site, although I don’t immediately see how it is different from Kickstarter.com.
  • IndieGoGo is a truly global funding market with projects and investors in 163 countries. Although it tends to emphasize “projects” that have a social benefit, there is plenty of room for for-profit enterprises. If you have a tax deduction available for investors, this platform will help you promote that, too.
  • InvestedIn has everything from a beauty queen in need of pagent fees to a social network looking for marketing dollars. Like most crowdfunding sites, this is a gift/reward site.

Also of note:

  • WebEquity manages to sneek around the legalities of offering stock by pairing entrepreneurs with “sweat equity” workers. Most requests on this site are for Web or app developers, but the concept could apply to any skill set. Need a CEO? How about a great sales person? WebEquity can match your needs with someone willing to work for stock.
  • Cofundit is a European effort. (But remember, money and good ideas know no borders!) By putting a formal evaluation step into the process, Cofundit takes a major step toward quality assurance. This is an important step for investors, and it helps explain why the companies that seek money on Cofundit are looking for $200,000 to $500,000 or more! Other European sites include WiSeed, which you can review if your French is better than mine.

Whichever site you choose, think of crowdfunding like social networking. If you are on Facebook, it doesn’t mean you can’t also be on LinkedIn. For a serious fund-raising campaign, join several of these sites to reach the maximum number of funders.

But — also like social networking — remember to hit up your friends. You’ve got to build a crowd for crowdfunding, and getting your friends involved is a good start.

Dedicated to your profits,

David

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About David Worrell

David Worrell is a serial entrepreneur, consulting CFO and financial analyst. His new book, Entrepreneur's Guide to Financial Statements, has been called "Mandatory Reading for Small Business Owners". David's tips and tricks for running a more profitable small business can be found here and on his business blog, www.RockSolidFinance.com.