Small Business Tips: Raising Money from Your Community

Small Business Tips: Raising Money from Your Community

The infusion of capital into your business is an essential step in keeping it operational. Whether you have a brand new startup or a growing company looking to expand, having access to capital isn't always that far away. Instead of turning to venture capital or angel investors who tend to want a stake of ownership or management say in your business, turn to your fans. Your customers and clients can be an excellent source of funding for virtually any business type.

Why Raise Money from Your Community

From fans to customers, your community is one of the best resources you have to building capital. If you are hoping to expand your business, your customers likely want to see your operation get closer to them. If you are a startup, family, friends, and others interested in what you have to offer are often much more passionate about supporting you than a traditional lender. Your community is less likely to demand expanded business plans or complex market research. Nevertheless, it's not always simple to ask your customers for financial support.

Turning to Fundraising Tools

To connect your business's financial need with your community, focus on using a third-party fundraising website or service. There are various options available, each one offering a wide range of opportunities. Not only can these sites help you provide your community with a way to help fund your ideas, innovations, or expansions, but they can also help you reach more potential investors than you would otherwise. Take a look at some of the most well-respected of these fundraising tools.

Kickstarter

Perhaps one of the most well-known of the crowdfunding websites, Kickstarter offers a number of advantages. First, because it is well-known, it provides you with access to a larger number of potential investors. This site provides donation-based funding without any ownership given away. Use this site if you are looking for fundraising for a new, creative venture such as developing a new product. It's not necessarily ideal for other types of business ventures. Kickstarter takes a 5 percent fee of the total funds raised plus a payment processing fee.

Indiegogo

With Indiegogo, you can raise funds for virtually any type of goal. The company does not review projects before posting them, giving you more control over the process. Indiegogo takes 4 percent of all funds raised as a fee on projects that reach complete funding. It's one of the lowest fees from a crowdfunding website for successful campaigns. If you don't reach full funding, though, it charges 9 percent of total raised fees. Indiegogo is a growing site with the potential to help you raise a significant amount of money because it has a large funding community.

Peerbackers

Another excellent option for entrepreneurs is Peerbackers. You can create reward and investment-based crowdfunding campaigns on this site. And, you can promote your offering across the Internet very easily. The company also provides a number of marketing tools to make it easier for businesses to get their opportunity in front of more people. The fee is 5 percent for completed campaigns and 2.9 percent for transaction fees. Businesses can establish get-as-close-as-we-can or all-or-nothing campaigns based on their needs.

Fundable

Fundable allows for large-scale funding for all types of business needs. It's geared toward businesses giving you access to more formal investors rather than just everyday people (but they are there, too!) Fundable offers more of a hands-on approach in that they provide you with help in creating a portfolio and marketing. It is free to get started on the site and it doesn't charge a success fee. However, it does have a $170 per month fee charged to you to help create and manage your fundraising efforts.

Crowdfunder

Another growing site worthy of your campaign is Crowdfunder. The company has a large number of investors. It is easy enough for your current customer base to get involved, but it also puts you in connection with some of the best access to investors. If you are looking for seed funding or Series A rounds, this is an excellent option. Crowdfunder charges fees based on your expected funding. For $500,000 or less, you'll pay $299 per month or $999 per month for more than $500,000. Additionally, it has a 7.9 percent successful funding fee and transaction fees of 1.9 to 5 percent. The higher fees are directly related to the larger network of investors on the site.

Once you determine the best site for your specific needs, you can then create a campaign and market it. You'll want to use social media, in-house marketing to your current customer base and clients, as well as larger-scale marketing to attract investors from within the crowdfunding site. There's never been a better time to raise funds from your community.

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