Calling on the Crowd
For startups like Rockstar before its explosion, with next to no capital but an idea with growth potential, another speaker offered a developing option to help a brand progress. After seeking help from friends and family, CircleUp’s Ben Lee suggested entrepreneurs consider crowdfunding resources like the ones he presented at the conference.
“A lot of the success of small brands is driven by word-of-mouth marketing,” Lee said, proceeding to show how crowdfunding can offer that, and capital to grow on as well.
Crowdfunding is a funding effort that garners interest in a product or brand and exchanges goods or equity for relatively small bits of investor capital. Lee mentioned some of the different kinds of crowdfunding options, such as donation-based Rockethub.com and Kickstarter.com, debt-based LendingClub.com and OnDeckCapital.com, and equity-based Angel.co and Circleup.com.
Lee suggested that entrepreneurs should comprehensively understand their brand and their story before taking advantage of these sites, which are capable of raising between $500,000 and $3 million depending on the company. The brand not only tells the message, but can serve as a significant part of product differentiation. The story gives the investors a sentimental, human aspect to an otherwise numbers-based discussion.
“Consumers are going to get excited not about the entrepreneur,” Lee said, “but about the brand more than anything else.”
With the passing of the Jumpstarts Our Business Startups (JOBS) Act in April, companies will soon be able to trade private equity for capital; an exchange that could greatly increase the use and possibilities of crowdfunding.
“It just snowballs from there,” Lee said.