Just about everyone with an entrepreneurial spirit and an ounce of creativity has had a bright idea for a startup from time to time. Who doesn’t want to be the next Steve Jobs or Mark Zuckerberg? And if you’ve got the bright idea that will drive you to success, that’s great. The initial concept is half the battle.
“Without some initial funding, you’ve got no chance.”
But here’s the reality – no one can achieve success in business with ideas alone. Let’s face it – you also need money. It’s expensive to build a staff, to manufacture a product and to market your brand so the world will take notice. Without some initial funding, you’ve got no chance.
Ideally, everyone’s startup idea would be backed by a filthy-rich angel investor willing to pour in all the money in the world, but that’s not always the way it plays out in the real world. To get your startup off the ground, you might need to rely on crowdfunding.
What are the keys to gathering startup money from the general public? How can you navigate from Point A – the initial sales pitch – to Point B where you’re successfully growing and managing your business?
There are a few strategies you need to pick up along the way. Here’s a rundown:
Delivering a clear, concise pitch
If you want people to fork over their hard-earned money to support your business, the first thing you need to do is explain your idea and what makes it so valuable. According to NerdWallet, the key is delivering a sales pitch that’s clear and concise. You don’t want to confuse people with excess verbiage. Do that, and the pursestrings tighten up fast, says Jim Dowd, managing director of North Capital in Salt Lake City.
“Distill your message to a one-sentence explanation,” Dowd recommended. “If the company’s founder can’t explain what they’re doing, chances are investors are going to lose interest.”
People today – especially those with the means to support a crowdfunded business – tend to be busy, with a million demands on their time. They don’t have room in their schedules to pore over pages and pages of documents about your small business. But if your pitch is short and catchy – think of it like a single tweet, or a catchphrase – it just might get people’s attention.
No one’s going to contribute to your business unless they understand it in simple terms. So get right to the point, and explain your business well.
Giving your idea mass appeal
Roping in the first one or two people for your crowdfunding campaign might not be that difficult. You probably have a couple of close friends or family members close by who are willing to contribute. But what’s a little bit more difficult is building mass appeal. How will you get the crowdfunding effort to snowball?
According to Inc. Magazine, it’s always difficult to sell your startup idea as something that’s “cool enough for the crowd.” Brian Meece, co-founder of RocketHub, says this image doesn’t come naturally for most fledgling business.
No party is jam-packed with people from the second it begins. Instead, the gathering forms slowly and organically – one person starts having a good time, then they invite their friends, and gradually it builds. A crowdfunding campaign works the same way, more or less.
“Crowdfunding is like an online event,” Meece told Inc. “It’s like a party. Who wants to go to a party that nobody else is going to? I don’t.”
Try to build mass appeal for your startup by slowing broadening your focus to include more and more people. Social media works great for this – you can use sites like Twitter and LinkedIn to appeal first to your closest friends, then to your friends’ friends, then to your friends’ friends’ friends and so on.
Respect your investors – and their money
At the end of the day, you have to keep in mind – you’re asking a lot of people. You want them to part with their hard-earned money, and that’s never easy. With this in mind, you need to always be respectful of your investors and their checkbooks.
“Your goal is to develop trust with your investors.”
First and foremost, this means explaining in detail what your plans are. No one wants to toss their cash into something without knowing specifically why. So spell out your intentions, and stick to them for the long haul.
You don’t want to exaggerate when it comes to your expectations and plans for your growing business. NerdWallet noted that sometimes, a certain degree of salesmanship is to be expected, but you can’t get carried away. Your goal is to develop trust with your investors.
Along those same lines: you want to respect your investors themselves. Chances are, they’re interested in your business because they have some industry knowledge and a great deal of insight to provide. Listen to your investors and demonstrate that you value their input.
What you can do today
Crowdfunding is a complicated process, as it’s not easy to ask people to fork over their money. But you can use the approach to build a business successfully if you follow the basic guidelines:
- Deliver a concise sales pitch. Go directly to the point – you don’t want to waste your investors’ time.
- Build mass appeal for your idea, slowly but surely. Social media sites make a great resource for developing a following.
- Respect your investors. Speak to them openly and honestly. This will help you develop that all-important trust factor.
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