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The New Rules of Startup Fundraising


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Fundraising

The world of fundraising has been turned on its head. A decade ago, entrepreneurs had limited sources for capitalangel investors, venture capital funds and rich uncles.

Today, entrepreneurs have a plethora of options.

AngelList pioneered online funding platforms, which spawned dozens of similar offerings to make meeting angel investors easier. Kickstarter and Indiegogo were the first to make raising pre-sale dollars on your brilliant idea a reality.

To date, over $1,000,000,000 has been pledged to Kickstarter projects, with the average project receiving approximately $20,000—enough to seed the initial stages of most ideas. Indiegogo doesn’t report up-to-date numbers, but, based on historical data, one could extrapolate that close to $200,000,000 has been pledged. It is projected that a total of $5,000,000,000 will be pledged across all crowdfunding platforms in 2014.

Enough data has been collected over the past five years to establish best practices for crowdfunding campaigns. I recently developed a course that teaches entrepreneurs the three key aspects of raising capital on a crowdfunding platform. You can view it here for free.

Contact List

Raising capital on crowdfunding is a function of “who you know”—and the good news is you can meet nearly anyone using social media. Ask Stacy Ferriera, who at 18 years of age secured an investment from Richard Branson by tweeting him on Twitter. Entrepreneurs are using social media to get the attention of influencers who can move mountains.

Messaging

The key to crowdfunding is weaving a compelling story through video, images and text. The most successful campaigns use video to highlight the people behind the campaigns and display the passion behind the project. It helps if your campaign is solving a real problem that people care about, such as home security.

Entrepreneurs who provide a passionate solution to a real problem increase their chances of success.

Campaign Management

Campaign management is the aspect most entrepreneurs fail to prepare for during their campaign. It is easy to focus on the launch, but many grow tired of campaigning by day 10. The key is to develop a 30-day plan ahead of time and recruit others (interns, virtual assistants, etc.) to carry the load.

Entrepreneurs who understand it is a marathon, not a sprint, are best equipped to meet their funding goal.

Have you tried crowdfunding? What are some of the techniques that helped you get across the finish line? 

This post originally appeared on Atelier Advisors. Lili Balfour is the founder and CEO of the SoMa-based financial advisory firm, Atelier Advisors, creator of Lean Finance for Startups and Finance Boot Camp for Entrepreneurs.  All AlleyWatch readers are automatically eligible for a 50% discount on either of the courses using the preceding links.

Image credit: CC by Jerzy Polański

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About the author: Lili Balfour

Lili Balfour is the founder and CEO of the SoMa-based financial advisory firm, Atelier Advisors, creator of Lean Finance for Startups and Finance Boot Camp for Entrepreneurs, author of Master the Finance Game, and host of the Finance for Entrepreneurs broadcast on Spreecast.

After spending fifteen years in investment management and investment banking, she decided to develop a firm to cater to the specific needs of early-stage companies. At Atelier Advisors, Lili advises leading brands across industries: from tech to consumer goods. In the past, she has advised over 100 brands, including:

Bag, Borrow, or Steal, Visual IQ, Alpha Theory, Derivix, Practice Fusion, Peeled Snacks, Sustainable Minds, Firescope, Chix 6, Duchess Marden, Erin Fetherston, Eckart Tolle, and Stuart Skorman (founder of Reel.com, Elephant Pharmacy, Hungry Minds, and Clerk Dogs (sold to Netflix)).

While advising companies at Atelier Advisors, she observed a common theme – -brilliant founders avoided finance. She began writing about entrepreneurial finance to solve this problem.

As a native of Silicon Valley and a first generation Mexican American, Lili understands the importance of imparting wisdom learned in Silicon Valley to the rest of the world. Her goal is to teach the entire planet about entrepreneurial finance.

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