What is crowdfunding or crowd sourcing?
Crowdfunding: a way to obtain financing through relatively small contributions or investments from a relatively large number of people. These people frequently discover these opportunities through the Internet.
There are two types of Crowdfunding
1. Debt/Equity Crowdfunding: This gives investors equity or a share of profits in exchange for money. It gives your crowd an opportunity to be the first seed investors in your business. Requires compliance with a variety of SEC regulations, and offers the most value if the business is capable of raising amounts approaching $1 million USD.
2. Contribution Crowdfunding: Your crowd is not composed of investors. Instead, each member contributes a relatively small dollar figure in order to be a part of your success. The exchange is mutual gift giving.
Which one should I choose?
Nolan Consulting can help you make this important decision. To start the process, you can ask yourself the following questions:
- Do your products or services enable a group to share an activity?
- Do you belong to the same group as your customers?
- Do your products or services connect your group to a history, a tradition, or an activity?
- Do your products or services connect you to a group?
- Do you view your products or services as an expression of your art form or your craft?
- Does mere ownership of your product suggest that the owner is a member of a special group?
Your answers to these questions will help you and Nolan Consulting weigh the options.
If you choose contribution crowdfunding you need three essential elements:
A project to fund:
- that can succeed if a well-defined amount of money is raised
- that can succeed in an acceptable length of time
A crowd to fund the project:
- that is full of people who value your concept
- that is of sufficient size and collective wealth to reach the necessary amount
Something to give in return for the crowd’s contribution:
- that is sufficiently appealing to draw contributions
- that is sufficiently cost effective to reach the necessary amount
- that does not violate state and/or federal law
- that is consistent with the company’s values, ethics, and brand promise
Crowdfunding lets you leverage your goodwill, concept, and community feeling rather than leveraging your personal assets and ownership interest. The people who value you the most are given an opportunity to become a part of your success.
The money raised through crowdfunding, just like traditional financing, can be used for any purpose. Therefore, crowdfunding is not only for new businesses. The major difference is that the company must convince a “crowd” to finance the project, rather than a bank or an investor.
In addition to raising money, crowdfunding builds the community of like-minded people that your business needs as customers. The bigger the crowd, and the stronger the feeling of community, the more opportunity there is for raising funds and making sales.
Why Nolan Consulting?
Nolan Consulting understands what is necessary to build a crowd and create a sense of community. The crowdfunding economy is different than the market economy. Profiting from the sale of goods and services in the crowdfunding economy requires a different set of skills. Our expertise in dealing with the merging of crowdfunding and market economies enables us to produce successful crowdfunding strategies and launch your business.
One element of this special expertise is the ability to identify what makes your products or services different. Your unique customers choose to buy, in part, based on something other than market considerations like price, convenience, etc. Nolan Consulting will help you define that special and unique element that drives sales. We will also promote that element to make sure that you sell to the people who value what you do the most. Our task will be to build and energize that community by appealing to the things that bind your crowd.