America is known as the land of entrepreneurship, home to entrepreneurs like Jeff Bezos, Steve Case, Larry Page, Mark Zuckerberg and the late Steve Jobs.
Today’s tech-entrepreneurs are finding exciting opportunities in media analytics and enhancements, enterprise web/mobile solutions, Internet publishing, survey software and auctions, game development and security.
Though angel investors write 16x more checks than venture capitalists, VC’s write the biggest checks to seed stage companies. Even so, 38% of startups are funded by family and friends, second only to personal savings and credit.
Crowdfunding is the fastest growing source of startup funding; it combines entrepreneurship and philanthropy, opens up new markets and motivates investors.
Forbescontributor and CEO of Crowdfunder, Drew Hendricks, says:
Sites like Kickstarter and Indiegogo provide the perfect platform for businesses to locate funds for a new startup. Crowdfunding has exploded in popularity in the past year, getting attention from both investors and businesses alike. But all of this popularity also means an increase in competition, which means unless your business can catch the attention of the matches, it will likely join the large number of projects that go unfunded on these sites each month.
The most successful campaigns seem to come with a good story. While most entrepreneurs are inclined to highlight the product and hide in the background, on crowdfunding sites, the entrepreneur is the story. It’s important you share what led you to create your concept and the passion you have for seeing that concept to fruition.
Hendricks offers these four tips for funding a startup:
- Consider your niche.
- Find a grant.
- Enter a contest.
- Crowdfund your idea.
Unlike in the donation model, investment crowdfunding makes individuals owners or shareholders who have a potential for financial return. Businesses seeking capital sell ownership stakes online in the form of equity or debt.
President and CEO of Safeguard Scientifics, Steven Zarrilli, says “emerging growth companies that nonchalantly foray into the deal process without thoroughly understanding what they want from a financial partner―or what an investor expects from them―stagnate the actual funding process.”
Rather than sign with the first interested VC, today’s entrepreneurs “weigh a number of options when choosing an investor, namely operational expertise, the extent of their network, access to customers, financial partners and industry expertise,” writes Zarrilli for the Huffington Post.
He cites three ways successful entrepreneurs close deals faster:
- Create a well-articulated plan.
- Approach valuation with rationale and reasonable expectations.
- Properly evaluate and assess management capability.
Crowdfunding sites like Crowdfunder, Rockethub, Crowdrise, Somolend, appbackr, AngelList, Invested.in and Quirky offer a variety or models and services tailored to a startup’s particular needs and objectives.
Startup Funding – An infographic by the team at Fundable