Sunday, July 22, 2012

Raising Money through Crowd funding

For as long as there has been money in South Africa, people have been trying to get their hands on it for one reason or another.  For some it is just a matter of personal gain, for others it is to keep a roof over their families heads and food on the table.  But for some, it has been to create a business plan and start a business or create a work of art, or other goal geared towards contributing to society as a whole.

There are hundreds of ways to raise money and most of us have been involved in some form of it or another all of our lives.  Starting with the child on the corner selling lemonade to passerby's, to community bake sales, car washing services, street performing and the like.  All of these activities involve raising money.  The problem with them is that they normally only raise a small amount of money at a time and require a great deal of effort on the part of the people working them.

Crowd funding is a new way of raising money in South Africa.  Think of crowd funding as a community bake sale, except it's happening simultaneously all over the world.  All of those little sums of money the bake sale generates add up to a large amount that can be used to fund any type of business or project.  The vehicle used to carry on this worldwide bake sale is the internet.

Raising money through the internet is nothing new either.  However it has in the past been the unfortunate victim of scam artists trying to fool people into sending them money.  Because of this raising money through the internet was given a bad rap.  Now though through the use of professional crowdfunding sites it is possible to legitimately raise large sums of money over the internet.  These professional sites make raising money easier because they have reputations and standards to meet to comply with government regulations so people are more willing to trust them.

Raising money through crowd funding is used mostly by business start-up entrepeneurs as well as artists, musicians and film makers.  These are people who do not qualify for financing either through angel investors or venture capitalists but still have a great idea or project that they would like to bring to the public.  So instead of going out and washing cars or having a bake sale, they make a video explaining their project, the benefits of it to society, why they can be trusted, and what their long term goals are.  This video is then placed on these crowd funding websites where people can watch them, get more information, and if they decide to they can invest in that project.  These small investments from hundreds of people add up to enough money to get the project off the ground.

Another means of raising money is using your own network of people you know.  Start off with your friends and family.  Tell them about your project and that you are raising money to make it a reality.  This is the most common form of crowd funding and has been around forever.  Then take your message to the people through social media and press releases.  Tell them about why your are raising money and also why you have chosen crowd funding as your vehicle to come up with the capital you need.  Let them know what the benefits to them will be for investing in you and build their trust.

Raising money through crowdfunding can happen very quickly if your message is a strong one that motivates people.  Or it can take some time to build up momentum.  The most important aspect of raising money through crowd funding is you continue to spread your word on a daily basis and be open and honest with the people you hope will invest in you.

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