Crowdfunding

In my business, most of my clients are early stage companies.  They are great entrepreneurs who are learning to be great business people.  Often, these people have expended the bulk of their treasure and their family’s treasure, maxed out their credit cards, etc. investing in research and development and other startup costs.  Now they are finally ready to grow and need help building a scalable operation and finding ways to fund their growth.

The other common thread is passion.  To qualify as a potential client, the business person must have a passion both for their product, of course, and for turning that into a business (two very different things)

These companies can’t access bank financing as they have not been in business long enough nor do they have the necessary 3 years of profits to show.  Without the banks or more family members, the options are limited.

·        Angel Investors. 

These are people who have very deep pockets and are looking for places to invest and get returns greater than they can achieve in traditional financial markets.  The difficulty for the entrepreneur is that she will have to give up significant control and future profits to her “angel” which is often hard to do.

·        Factoring

A factoring company basically loans money against an invoice.  Although expensive, this option gives the business a chance to utilize the money to buy inventory to fill the order.  Particularly if the invoice is large, this is a very doable solution. 

·        Crowdfunding

This is a relatively new option and includes such sites as Kickstarter.com; gofundme.com; indiegogo.com; etc.

I am learning all about Kickstarter.  It’s an interesting concept.  In short, it’s people helping people which is the essence of humanity.  People turn to Kickstarter when they have a great idea and need some help getting it off the ground.  They post a video explaining how much money they are looking for and why it’s needed.  If you buy into the concept, and want to help, you simply make a pledge and complete the transaction on Amazon. 

There are a couple of catches however…

First of all, if the required total is not pledged, no transaction takes place at all.  For example, if you need $1,000 to buy parts to make your prototype and only get pledges of $999 then you get nothing at all.  Obviously, if you get that close on any project, call me and I will chip in $1 to make it go.

The other catch is that you must give people something for their donation.  Perhaps you might send them an autographed napkin or post their name on your website or even send them a sample.  You can imagine that the better the incentive, the more likely it is that someone will contribute.

Rob Thomas raised $5.7 million on Kickstarter in April of 2013 to make a Veronica Mars movie.  People who pledged $10 received the shooting script while the $10,000 backer got a speaking role in the movie.

Of course, the average project on Kickstarter has much more modest objectives.  Just today, John Chartier launched a project to raise $500 to help him figure out how to bake “a really good apple pie”.

Bibby’s Chocolates has launched a Kickstarter project to raise money to fund their huge potential growth.  Founded by chocolate expert Bridget Ludy, Bibby’s combines chocolates and flavored almonds creating a taste sensation that is out of this world.  Bridget is in talks with a large California supermarket chain as well as most of the large Silicon Valley campuses (Apple, Google, etc.) to sell her products.  As a woman owned business, she is being actively solicited by a number of municipalities looking to promote her products in their facilities.

Assuming Bibby’s can meet their project goals, it will take them a long way towards being able to fulfill these orders when they come to fruition.

Check out their Kickstarter video at: 

 https://www.kickstarter.com/projects/bibbyschocolate/bibbys-chocolates-inc-is-growing-and-we-need-your

I believe in Bridget and her products and know she will succeed.  I went on the site and pledged support.  I think it’s a worthwhile investment