At Swank Life, there’s nothing we like better than capitalism infused with a liberal dose of entrepreneurial spirit. That’s why we think crowdfunding is one of the swankiest ideas spawned by the Internet Age. So…have you heard of crowdfunding yet? If not, here’s the thumbnail sketch. In the past, an entrepreneur with an idea but short on funds was caught in a serious catch-22 situation. It takes money and connections to start a business but, when you’re just starting out, who has money or connections?
To complicate the money-raising matter even further, securities regulations (until recently) set a high standard for individuals wishing to invest in a small, for-profit company – either $1 million in the bank or a $200,000 income for starters. This left out a broad swath of people who wanted to contribute a modest amount of money to a project. The passage of the Jumpstart Our Business Startups (JOBS) Act now allows an individual to kick in ten, twenty, or hundred bucks into a startup business he or she believes in.
Enter crowdfunding, which taps into the power of the crowd rather than the power of one rich investor. Would you rather receive a one million dollar check from one person or a tsunami of small investments that add up to one million dollars? Who the heck cares? Either way, you would have a million dollars to put towards your startup but the reality is that not every newbie entrepreneur knows someone willing and able to write a million dollar check. Crowdfunding harnesses the power of the Internet to spread the word about your business idea and raise money one dollar at a time.
As with most things related to the Internet, there’s a learning curve associated with using crowdfunding. The following three concepts will go a long way towards learning how to convince small investors to part with cash.
1. Since people prefer to give money to someone they know, make yourself known in the local community! If there is a small business incubator or accelerator, get involved.
2. Everyone loves a good story, so learn to describe the aspirations of your company in a narrative format that hooks listeners. If you’re not a natural storyteller, get better at it.
3. Make the social argument. Investors are more likely to give money to your vision if they can see how it will help either the local community or the larger world community. In other words, the returns on their investment shouldn’t be measured only in dollars and cents but also in making the world a better place.
Writers, filmmakers, and artists were among the first to tap into the power of crowdfunding, but it’s a wide open field now. Jake Swank wants to know: What’s your secret entrepreneurial idea? (Top image: Rocio Lara)
The Swank Life Team