This blog post was written by Bobby Gaglini, who works on the external marketing team at Vistaprint, and specializes in search marketing.
Crowdfunding was one of the hottest topics in 2012 for many entreprenuers and small business owners, and the chatter will most definitely continue through 2013. In a nutshell, crowdfunding is when business investors, along with everyday people, finance your company (by giving you a little money) in return for a stake in the hopefully blossoming business later. In essence, your “crowd” funds you.
While many small business owners are jumping with joy at this possibility, there are major loopholes in the concept that have caused the potential approval of financial crowdfunding to be delayed until early 2014. So let’s explore crowdfunding: what it is, the problems it may cause, and whether it’s right for your business.
Imagine for a moment that nearly everyone could look at the business you were trying to launch. Now imagine that a handful of those people love your idea and want to help you get it off the ground. Enter crowdfunding: the little buy-only investing market for entrepreneurs and small businesses.
While financial crowdfunding may seem like the Holy Grail for small business owners with a lot of heart and not a lot of dough, the potential issues that can come from crowdfunding are potentially significant. Right now, the regulations are loose at best, meaning that unsuspecting investors could help businesses with poor strategies take off, before they eventually crash. Even worse, many of these ideas and pitches could end up being complete scams, leaving investors high and dry.
Whether these investor pitfalls outweigh the benefits is still not certain, at least until the Securities and Exchange Commission look at the rules again, most likely in early 2014. But, it’s never too early to start thinking about whether your business model is something that people would like to invest in.
When thinking about this, ask yourself questions like:
- Is my company truly unique, or is there a portion that’s unique, with a purpose that when spoken, people say, “Woah, that’s really cool”?
- Does my business have the potential to grow rapidly, and continue its steady growth throughout the coming years?
- Is my company something that a lot of people (not just a niche) will be genuinely interested in seeing exist?
- Does my company make sense in the long run?
If you answered “yes” to these questions, your business has crowdfunding potential. If you answered “no” to most of them, that’s good too. It’s not for every business, and only time will show us whether the first few companies actually succeed.
So what do you think? Is your business a crowdfunding candidate? Let us know why or why not in the comments.