Should you? Or shouldn’t you?

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Your new product is ready- but, you don’t have enough money to bring it to market. Do you search for angels? venture capital? crowdsource? That last choice is the new one, the one made possible by the Jobs Act (reported here), where you convince folks (typically LOTS of folks) to provide you with a small amount of money (each, but it should be lots in total). Typically, those folks want something in return. There are internet sites that makes crowdsourcing all possible. Kickstarter, Indiegogo, AngelList are three such sites.

If you doubt these work- consider how President Obama had amassed his campaign funds when he first ran for president. Of course, that effort involved folks thinking they were providing money in return for getting great government.

Which brings up the key question:  What will YOU offer folks to invest in your venture? That is among the biggest issues for you to capitalize on this new funding source (pun intended).

There are other issues to consider. Like, if you are successful in raising the funds you need to get started, where will you get the next round? Because now your company will already have a ton of shareholders to accommodate- and vote- should you need to dilute their ownership. Venture capitalists don’t like that scenario. It may even be tough to sell your company to another entity because of that ownership, too.

You can also bet that your “investors”- who got equity or some other perk from you- will be sending you their thoughts- regularly and often. You will probably have to hire a full-time professional to cater to these stakeholders. (You know, like public companies need a shareholder relations officer…)

Of course, you also have to deliver the product, reward- or stock certificate- you promised them. On or before the date you promised. If not, given today’s litigious environment, you can bet on at least one lawsuit.

But, there are plenty of pluses, too. Crowdfunding is networking, at its essence. So, you will be getting lots of new people to hear about you and your product. It may even get you that contact with venture capital or a marketing partner that you could not get before.

Crowd

It also serves (assuming you are successful) as a “proof of concept” or “proof of market”. After all, if you can get all these investors, there are lots of people who believe in you and/or your product. You can feel more certain that folks will buy your product. (Since we are considering this process for a medical product, we recognize that it only proves that people want our product- not that physicians will prescribe our product…)

It can also cause rapid failure. That is not a bad thing, per se. After all, knowing that your product will fail- early on- saves money in the long run and time and energy. So, you can go on to the next thing- or fix this one, so it is not a failure.

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7 thoughts on “Should you? Or shouldn’t you?”

  1. These are tough questions to wrestle with. We are taking our first steps for Tawki on IndieGogo shortly. The value to crowdsourcing over VC is threefold:
    1. It’s not all or nothing, so it is easier to get started and build some momentum.
    2. You don’t have to give up equity.
    3. You can actually build a fan base – so it is worth doing it even if you don’t need the money.
    In the meantime, we are getting the brand active on Twitter and FaceBook.

    1. Alessa… crowdfunding may be the right way for developers of new “whatevers” to get their “whatevers” out the door faster- and to find out if the rest of us thing it’s the best thing since sliced bread, as well.

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