If you’re looking for investment capital for your business, there are many routes you can take. Chances are, by now, you’ve tried many of them. But how do you know that you’re doing the right thing? How do you know that you’re not missing some important steps while looking for the right investor, or generating a buzz around your business? While there’s no foolproof answer to these questions, there are many ways you can stay on track, and cover your bases to get the maximum results from your search. One of the best ways, these days, to do that, is to look for your funding online. Online equity crowdfunding platforms are huge right now. And all indicators show that it will be that way for a long time. Here’s why:
The JOBS Act
One of the reasons why online crowdfunding is so popular is the JOBS Act. The JOBS Act, or Jumpstart Our Business Startups Act, has made it easier for independent businesses and entrepreneurs to raise capital, and in a way, leveled the playing field for people who are new to their industry, or who don’t have a big financial or brand platform to back them up. Wikipedia provides a good summary of the act as follows:
The Jumpstart Our Business Startups Act or JOBS Act, is a law intended to encourage funding of United States small businesses by easing various securities regulations. It passed with bipartisan support, and was signed into law by President Barack Obama on April 5, 2012. The term “The JOBS Act” is also sometimes used informally to refer to just Titles II and III of the legislation, which are the two most important pieces to much of the crowdfunding and startup community. Title II went into effect on September 23, 2013. Title III is still pending.
In essence, what the JOBS act does is to ease restrictions and widen the timeframe that startups and new businesses have to raise capital. This gives new businesses a leg up in the beginning, and allows for much wider types of fundraising, both online and offline. The reason why this is so important to online fundraising, is that it’s essentially deregulating how much you can fundraise in your initial rounds. And while moving at the speed of the internet, this can give a new company virtually all the funding it needs, without traditional regulation that may have shut them out of contention in the past. This type of flexibility was typically only available to VC’s with a lot of backing. Now it’s open to everyone.
Why Online, and how to go about it sensibly?
It’s simple: you can reach an unlimited target audience, do it with very little overhead, and leverage your goals and ideas on a relatively even playing field. Plus, the numbers are there to back it up. According to Forbes’ Kay Koplovitz and her article on the impact of the first year of equity crowdfunding, estimates for the startup funding commitments made online were estimated at over $217,000,000 as of September 2013. That averages out to $407, 685 per company involved, which are huge numbers considering that online deregulated funding is still in its infancy.
So how do you get started with crowdfunding online? To begin with, you need to start integrating online fundraising with your offline plan. This means creating a solid website, online marketing strategy, and incorporating both into the framework for connecting with investors that you already have set up. Reach out to your contacts, and introduce them to your online presence. Find out who else is crowdfunding in your industry, and reach out to them as well. Even if they’re potential competition, it can’t hurt to make yourself known, and to share certain ideas in the beginning.
Another good idea is to see what other successful crowdfunders are doing online. Follow the patterns of industry leaders to see where there successes, and failures are, and use that as a blueprint to chart your own coarse. You can also leverage the power of your own successes, as they happen, to show investors that you have a sound plan, and to give yourself credibility as you head into bigger investment plans and platforms.
Lastly, remember that the Internet is infinite as far as potential. Don’t get discouraged if you don’t have immediate success. You need to stay focused, motivated, and prepared to learn from your failures. The money is out there, and it’s moving. There’s no reason you can’t be a part of it. You just need to take the right steps, and network with the right people.