Is Crowdfunding Right for My Startup?

Crowdfunding is a Good Idea

3 Strikes and a Mulligan

What do a Palo Alto garage, Harvard dorm room, and Stanford University Campus have in common? They launched Silicon Valley. I know, bad joke, but the impact of Facebook, Google, and Apple have done for Silicon Valley and the world, is certainly no joke. The problem with their home run success rates is that most everyone else who came before them or will come after them are destined to strike out. Or are they? Fortunately, the trio of Silicon Valley tech behemoths may have given the predecessors and successors a mulligan, i.e. an extra chance. The issue is that they were only given one mulligan, so it’s important to use it wisely. It is for this reason that alternative financing, like crowdsourcing, is essential for new startups. Crowdfunding should be but a small piece of the overall package.

Sometimes Survival of the Fittest Means Sharing Your Pie with Others

Every startup should use crowdfunding, according to Forbes. For example, the New York startup called Roomie raised $17 million in their initial funding series and yet they still decided to crowdfund, if for no other reason than to build a client base. That is to say, you can have all the expertise in the world, but without loyal users as opposed to passive viewers you have nothing. Generating a pool of loyal users can be done by making crowdfunding a part of your business model. By starting this correctly, you could have thousands of loyal inventors and users and a nice amount of new cash flow in no time.

Now That I Know Crowdfunding is a Good Idea, How do I do It?

  • Comply with federal (SEC) and blue sky (state) securities laws
  • Know your product or service
  • Know your client base
  • Nail the Pitch
  • Strive to obtain diverse investors
  • Assure and reassure your investors
  • Use social media and your own employee’s friends and family to get the word out about who you are
  • Remember that networking and advertising are not mutually exclusive of one another

Be innovative – people are less likely to buy into something that already exists

  • Protect your IP before you begin crowdfunding
  • Develop and tweak your business plan as needed
  • Size does not matter – any company no matter its size should crowdfund
  • Innovation is vital

Remember These Key Points

  • As important as crowdfunding may be, it should by no means be the only source of startup funding, rather it should be used in conjunction with higher yielding potentials. This can come by way of venture capitalists or angel investors.
  • Remember that neither crowdfunding nor a strong Series A capital fund will be of any benefit if you do not distinguish yourself from others.
  • Crowdfunding can be used to fund a variety of startups, including technology startups, blockchain companies and their initial coin offerings (ICO’s), and traditional brick and mortar businesses

Above all else innovate, innovate, innovate. Facebook, Google and Apple have remained at the top of their game that for this very reason. Take Google’s self-driving car as an example, or the Apple Watch, which launched Apple into the healthcare sector. In this day and age, it means building a loyal user baser early, which can be accomplished through crowdfunding.

Consult with a Silicon Valley Start-up Lawyer Today

Crowdfunding can be an essential tool for your business from the start, and it is important to understand the legal considerations you’ll need to take. For help with legal and business development help with your Silicon Valley startup email or call Startup Company Counsel at (408) 441-7555.

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