Crowdfunding: With A Little Help From My Friends
Posted by Ashtyn Douglas on November 12, 2013 in Business Management, Business Start Up Advice, Startups [ 0 Comments ]
“I get by with little help from my friends.” Ringo Starr and the fellow Beatles mates sang this world renowned lyric for Sgt. Pepper’s album, but the underlying idea still strikes an emotional cord between friends across the world and aptly applies to the social relationships we build in business as well.Even more so, within the recent years, businesses have been financially “getting by” with the help of friends and have been able to launch their entrepreneurial dreams with crowdfunding.
Through the power of the internet and sites like Kickstarter and Indiegogo, smaller businesses showcase ideas through these digital platforms and rely on individual investors in exchange for backer rewards. Depending on the amount of the contribution, the investor is promised anything from a branded T-shirt to the finished product. As of the recent passing of the JOBS Act , crowdfunding investors will soon be able to receive stock in the company rather than a gadget.
This perks-based funding structure is a great alternative for startups with low-equity and allows a more collaborative community approach to the building of a product. The company simply creates an alluring video, promotes it, and lets the audience contribute any amount as low as $1 without the founders having to beg and argue numerical details before an intimidating group of angel investors. While crowdsourcing may not be an appropriate funding model for all small businesses, many companies have seen great victories with these friendly platforms. Kickstarter has successfully launched 43% of showcased ideas and has facilitated the launching of 121,715 successful projects to date (Tweet This Stat!). If you’re wondering if crowdfunding is right for your small business, take a note from these 5 companies that succeeded with the help of their internet friends:
Scott Wilson, a Chicago based designer, created a wrist band that allows a user to quickly convert an Apple iPod nano into a watch. He originally asked for $15,000 to get his project up and running, but was rewarded with almost a million in pledges. In 2010 he attracted a resounding 135,000+ backers and is now seeing his project child sold worldwide by Apple, WalMart, and Amazon along with his other iPhone accessories.
2) Do Good Bus
Crowdfunding isn’t only privy to gadget geniuses and program designers. Do Good Bus, a volunteer organization that shows people how to volunteer with scheduled bus pick-ups, raised over $100,000 on StartSomeGood. They now are transporting volunteers all over the nation and contributing to the wellness of nationwide communities. They also couldn’t complain about their recent tour with Foster the People either.
Related: Startup Tuesday: Securing Funding
3.) Natural Resources
Just as small business loans and merchant cash advances can be used towards maintaining operational costs for already established businesses, so can crowdfunding be a source of capital for expansion or continuing expenses. Natural Resources, a struggling local retail store in the valley of San Fransisco, needed $45K to remain open and continue to provide guidance to new and expecting mothers. This baby goods center, which has been owned and operated by mothers for the past 25 years, raised $3,000 over their goal and are now able to remain open, providing classes and support to local women in the community.
4.) Ministry of Supply
Who wouldn’t support the creation of an astronaut suit for the common business man? Athletes from MIT pledged for $30,000 to create business shirts and apparel using body heat-regulated material used in space. Instead creating shirts that result in nasty pit-stains, this “performance” business wear was a success by borrowing NASA technology and grossing over $429K in monetary contributions. Since then they have landed over $1.1 in financial backing from an array of venture capitalists and angel investors. Needless to say they are saving savvy businessmen the embarrassment of an ill-designed dress shirt.
5.) Grain Surfboards
What originally was a one-man surfboard shaping room in the basement of Maine (believe it or not), is now a hub for do-it-yourself shaping workshops and hands-on classes for building sustainable wood-based surfboards. The creators of “Truck-n-Trailor”, the mobile surfboard building classroom, were able to raise $5K over their proposed budget to launch their portable shaping classroom. They are now taking their DIY Grain workshops across the country and are “teaching like-minded others how to give wood its well-deserved place in the lineup”.