4 Crowdfunding Mistakes For Entrepreneurs To Avoid

Written by on January 7, 2013 in Career - No comments | Print this page

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crowd-fundingAs a new entrepreneur it can be challenging to come up with funding to run your business. True, you should make enough sales so that your business can fund itself, but the reality is that you need money to make money. Banks usually won’t give loans to new business owners.

It’s tough to get attention from a venture capitalist unless you are well known or your business idea is super unique. Many entrepreneurs are turning to crowdfunding to help them finance their businesses. Crowdfunding is basically when you use your social network to raise money for whatever it is you are trying to do. You basically go to a crowdfunding site, set up a project, and then ask your friends and family to donate through the crowdfunding platform.

This is usually a simple way to raise money. However, some entrepreneurs have had less than stellar results from crowdfunding. This article explains four things to avoid when using crowdfunding as a way to raise funds for your business.

1. Setting unrealistic expectations

Many entrepreneurs set unrealistic expectations when they set up a crowdfunding project. They will set out to raise millions of dollars when most of the people they deal with aren’t ridiculously wealthy. Don’t do that. Instead set a reasonable goal. It should be an amount you could realistically see your supporters being able to help you raise.

2. Thinking They Can Just Throw Up A Page and Donations Will Start Pouring In

Some people think that all they have to do is put up a page and people will just start donating money. Completing your project’s page is only the beginning. You have to find a way to engage your audience. You have to make them feel compelled to help your cause.

3. Lack Of Marketing

You have to tell people about your crowdfunding project. It’s the same as your business. No one will buy from you if they don’t know you exist. Likewise no one will be able to help you with your crowdfunding project if you don’t make it known that you have a fundraising project going on.

4. Not Asking For Small Donations

A lot of small business owners make the mistake of overlooking small donations. You may not want a lot of $1 donations. However, you may alienate someone with a large network of people by not having an option for a small donation. It can be very beneficial to have someone donate $1 but post a personal request to their network on your behalf. Influential people usually know other influential people. Don’t leave them out of the equation.

It is possible to have success with crowdfunding platforms. You should use this vehicle before you go to banks or venture capitalists. If you have a successful crowdfunding project, you can show potential investors that there is interest in your idea. It takes planning and patience to achieve this goal. Once you do, you’ll be able to focus on running your business instead of securing funds.

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This is a guest post.  Derek enjoys blogging about buisness and office enviroment. When he is not blogging, he enjoys working at a online marketing firm outside of New York City. The article above is for a crowdfunding platform.

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