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Finding enough cash for a start-up company is definitely one of the biggest challenges. Beyond traditional lending sources, many businesses have been turning to crowdfunding in recent years to meet their target capital goals. In fact, according to Wikipedia, crowdfunding groups raised $2.66 billion for companies and individuals in 2012 and it is projected that they will raise $5.1 billion in 2013. With all that cash floating around, it’s time to find out if crowdfunding is right for your business venture.

What is Crowdfunding?

The term refers to a group of individuals each contributing a small sum, which taken together makes a significant cash donation to a business or cause. Crowdfunding first hit the markets as a viable way to fund artistic and business ventures in the late 1990s and has financed everything from concert tours to disaster relief to movie production to startup company investments.

How Do I Repay the Crowd?

Crowdfunding is not the same as giving each participant a piece of equity in your company, although that may be allowed soon under the JOBS Act. In the past, those who donated have received things like front-row tickets to the targeted band’s concerts or first access to funded products. Crowdfund participants are usually individuals who are passionate about the group, cause or business they are supporting and are willing to receive alternate forms of payments. In some cases, contributors are looking for revenue returns or equity investments. The type of repayment will be determined by what type of crowdfunding group you connect with.

Where Can I Find Crowdfunding?

In 2012, there were roughly 450 different crowdfunding platforms. Most of these can be found online and each one has a specific focus. For example, Kickstarter.com funds creative projects, like art and music, but not business ventures. Crowdrise.com is aimed at charitable organizations and causes. Somolend.com focuses on helping small businesses in the U.S., while Crowdfunder.com allows both donations and investments in companies in both the U.S. and Mexico. Take a look at Wikipedia’s list of crowdfunding platforms to see if one fits your business profile.


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