1 min read Crowdfunding can be used to raise funding throughout the life of a business. When the idea of a new business strikes you, and there’s nothing built yet, then you should run a donations campaign–ask family and friends to donate $10K collectively. Make sure they understand that no one is getting paid back. The value of this step is that it establishes a network to support your business. The money can be used for some initial costs such as filing patents, building websites, and starting work on a prototype.
Rewards
The next step is to use a Rewards/Prepay campaign to pre-sell 50 units of your product. It can be anything. The key here is that you start to build your customer network. If you can’t presell 50 units, then you have a product problem that needs to be solved first before you go any further. The funding you raise should be enough to build the first version of your product.
Crowdfunding Campaign
With a successful rewards campaign behind you, you now move towards turning those customers into investors using the Texas Intrastate crowdfunding campaign. The Texas Intrastate law gives anyone the ability to invest in your business. Again, the funding helps, but building your network is the crucial point. If all fifty of your Prepay customers invested in your business you now have fifty brand ambassadors supporting your business–not trivial support by any means.
With support from your customers, and now investors in your business, you approach angel investors and start to raise funding to grow the business. Angels invest $250 to $2M to grow a working operation. When you arrive at the angel investors’ door, they are expecting you to have a product at some stage of usage and some revenue. The previous steps give you the ability to do that.
If you need more funding, then you can go back and raise revenue-based funding. The investors at this stage take a piece of the revenue as payment rather than an equity stake.
If you find yourself having trouble raising funding, it may mean that you skipped some key steps. You should go back and fill in the gaps of building your support network and your customer base before proceeding.
Read more in the TEN Capital eGuide: https://www.startupfundingespresso.com/how-to-raise-funding-eguide/
Hall T. Martin is the founder and CEO of the TEN Capital Network. TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group
