What makes crowdfunding work?

As an entrepreneur, I have no doubt that by now you have heard about crowdfunding and are most likely considering it for your own start-up or even the next set of business growth finance that you may need. The great thing about this source of finance is of course that you don't have to go hat in hand to the bank manager and explain to them just how you will pay them back over the next 10 years.

But crowdfunding in itself is not without its challenges. Its certainly not a case of simply adding your project to a crowdfunding platform and waiting for the money to start rolling in. Today we have a look at a few of the enormously successful crowdfunding campaigns we have seen globally and look at what has made them just so successful. Here are a handful of campaigns worth looking at:

Elevation Doc Elevation Dock is a simple idea; it is made out of aluminum, has rubber feet and is designed in proportions that allow it to be used with or without a case. This adds an element of flexibility that was simply not present before it became available. In addition to this, everything else about the product is designed to be of the highest quality possible. Its minimalistic aesthetics make it a suitable choice to go along with the iPhone. 

Penny Arcade Penny Arcade is an Internet comic site that used crowdfunding to improve what it offers to its visitors. Like many other sites on the Internet, Penny Arcade had to convert to an advertiser funded model, which the creators were not quite happy with.

LunaTik LunaTik is a project that started on Kickstarter with a relatively simple, but really quite brilliant, idea. The project involved marketing products that allowed people to turn their iPod Nano devices into watches. Not only did this project utilize a product that was already on the market – and very popular – it also combined that product with an already well-known product – wristwatches – to create something new and that has a natural, built in fan base.

I Draw Comics I Draw Comics was originally started on Kickstarter with a funding goal of $10,000. By the time the project closed, it had raised $245,870. The product, despite the tremendous amount of funding it managed to attract is a relatively simple one but is also one that would be eminently useful to people who are trying to break into the comic book world. 

Righteous Salad Dressing Righteous had quite a few things going in its favor from the start. The company already had a good reputation for its salad dressings and it was a realistic proposition that, with funding, the company could expand successfully into new markets. In addition to this, the salad dressing was already sold in several popular chains, showing that the company already enjoyed some success, which does help with persuading investors to put their money down for a project. 

South Africa's own crowdfunding platform Startme has also already seen a number of success stories in its first few months of operation. If you are keen to use this source of finance, be sure to read the abive cases and make sure your project is engaging enough for the crowd to invest.

All the best with this.

Using Business Plan Services to support your business

If you read a lot of start up stories about small businesses, you should be aware that some of them are cast in very romantic terms. They'll oftentimes be stories about how a business started out with two people who had an idea and R 100 between them or something along those lines. The fact is that small business plans and business plan servicesare vital to making a business successful. This means making the business successful in every regard, including getting funding for that business. For small businesses, having a good plan is of the utmost importance.

Why it Matters

Small businesses have a lot of work to do in inspiring confidence in people who may fund them. This is quite simply because small businesses generally start up with less money of their own and, therefore, are generally looking for a higher percentage of their start up money to be contributed by funders. Small business plans have to be able to assure those funders that the investment is a good one. Small business success stories tend to get a lot of attention. What doesn't get as much attention, unfortunately, is the fact that many small businesses never really take off and end up being abandoned rather quickly.

Small business plans have to give the people responsible for funding the business confidence that the people behind the business are willing to see it through. When the business startup doesn't have a lot of financial resources, the business plan has to be able to instill confidence in funders in other ways.

The People

Having small business plans written by professional business writers presents a significant advantage where describing the qualifications of the people involved in the business is concerned. Looking at the situation as outsiders, business plan writers have an easier time stating things in very factual, empirical terms. They'll tend to avoid trying to sell the business based on how inspired the people behind it are, for instance. Instead of going for those types of sales pitches, professional business plan writers will emphasize the qualifications of the people involved and why those qualifications may contribute to success.


Small business plans need to have very detailed information on finances. This is oftentimes the most significant shortcoming where businesses written by the entrepreneurs themselves are concerned. What somebody looking to fund a business wants to see is evidence that the business will be able to sustain growth after it is funded and that the investor will make their money back. When you don't have a lot of money to start out with, this is hard to establish, but a professional business plan writer can help you to do so.

Market Analysis

One of the real advantages in using a professional business plan writer is that they can identify weaknesses in small business plans that the entrepreneurs themselves may not have noticed. This ensures that the people who may or may not provide funding for the business are not the first people who see these weaknesses on paper. A good writer can take those weaknesses and present them in a way that doesn't make it seem like they are inevitably going to cause the business to fail.

Good small business plans are at the heart of any successful small business. Without a good plan, a business quite simply has a much lower chance of succeeding and the people who are responsible for funding new businesses know this. If you present them with a good business plan that is professionally written and that is backed up by facts in every regard when it makes a claim, you have a much better chance of getting your dream business funded and on the way to success.

Does Peer to Peer Lending Offer a Promising Future?

Just over six years ago, peer to peer lending became legal in the United States, and nations like South Africa followed suit in short order. While this sounds a bit like computers talking to each other, it is actually a way for many people to side step the banks for finance options like small business funding.

As with any new lending or investing avenue, there were growing pains that caused different results than those that were expected.

What Attracted Lenders

Peer to peer lending is a simple concept that involves the use of other people's money by those needing to establish a loan. The reason it was attractive in the first place was the return on the money loaned was substantially better than could be expected from a savings account or investment of funds in stocks.

Companies that sprung up to be the caretakers of this funding promised to be the watchdogs, do the credit checks, and make peer to peer lending safe for those who chose to invest or save in it. In the early phases, things did not work out well through some of these companies.

What Actually Happened

Many of the earlier firms that dealt out the money to borrowers did not concern themselves enough with credit checks on those requesting the money. Unlike banks, they took those who were higher risks, and many defaulted on their loans.

Although the interest rates on the loans were attractive to lenders, they were markedly lower than what the borrowers were paying to credit card companies. This is why peer to peer lending was interesting to borrowers.

The companies that were more conservative took the banks' lead and looked into the credit history of those requesting loans. Instead of maintaining standard rates for everyone who wanted to borrow money, they based the rates on payment history and credit scores. Those with extremely low scores didn't get the money, so it was less risky.

Peer to peer lending was pictured as a way everyday people could help the little guy out while snubbing their noses at the big banks. That may have been the case in some instances, but it proved to be more popular with investors for wealthy families seeking a bigger return on assets and hedge funds.

How Well Does Peer to Peer Lending Work

After the early years, peer to peer lending began to undergo adjustments and lenders saw a reasonable return on their investments. Some borrowers still make up stories to get more sympathy or look more capable of repayment, but the checks and balances have improved so the defaults are greatly down from the inception of peer to peer lending.

Lenders have a choice as to where they want to use their money. It is tempting to take a 10% to 14% return for a loan that is not as secure as some others are, but that is the trade-off for the better return offered. More conservative lenders don't get the big buck returns, but they are more assured that they will get their money.

Even though peer to peer lending is in its infancy, it has already proven to be a way to earn a respectful return on money. Some investors are still waiting to see how well it will perform for another year or two.

The interest rates are bound to level out some before the growing pains of peer to peer lending run their course. Of course, those who wait may see a great drop in earning potential before they make a commitment.

From the borrower's side of the fence, peer to peer is a good avenue to pursue if there is a real necessity. The rates between credit cards and peer to peer lending are closer now than before, so it might not be advantageous to pay one debt to assume another.

Using Social Media to Fund your Crowdfunding Campaign

Almost everyone on the planet today is connected to some form of social media.  These are sites that let people interact with their friends and family no matter where they are in the world.  They are also the spark that lights the powder keg to make something “go viral across the globe”  What happens when something goes viral is everyone who sees it, tells their friends about it, who tell their friends, and so on until it has crossed the threshold from a local story into national or world news.  Only social media has the ability to make this happen.  If you want to get your crowdfunding campaign out to the most people possible then using social media is a must.  But not all social media is created equally.  Here is a list of some of the best social media sites to use to get your project to go viral and raise your business finance before you know it.

If you walked down the street asking random people “Do you have a Facebook account?” more than half of them would say yes.  It is the largest single social media, networking site on the planet and something you must tap into to be successful with your crowdfunding campaign.  The first thing you need to do is have something, a story or better yet a video, that people are going to want to share with everyone they know.  It has to tell your story and tug at their emotions.  Simple saying “I need money to become an artist” is not going to cut it.  You have to sell yourself.  Tell people the struggle's you've been through, the sacrifices you've made for your craft, what will set you apart from others in your field, what good to society you plan on bringing with your work, etc.  These are things that not only open up people's hearts but their wallets as well.  Post this on your Facebook page and invite everyone you know to watch it, ask them to “like” it and share it with their friends.  Before you know it you will have hundreds of people spreading the word for you.

Reddit is known as “the front page of the internet”.  If you can get your story on Reddit and have people vote it up (basically the same concept as like on Facebook), you will have thousands of people reading your story.  They will then start to spread it among their social networks and before long you will have to buy more bandwidth for your server because so many people will be visiting your site.  But be aware, Reddit readers can be a tough crowd.  If they think for a moment that you are not being sincere or don't “buy” your story, then they will down vote it completely off the site.  The morale of the story is make sure you have your story/video perfected before you start your social media campaign.  You only get one chance to make a first impression with people, don't let yours slip away over a shoddy pitch.

Twitter is the latest incarnation of the original text message.  With Twitter you can send a text message (up to 140 characters) to millions of people at once.  Of course to do that you need to get people to first follow you on Twitter.  This is something that takes time and effort.  You need to search through Twitter's profile list for people that have the same interests as you or are in the same field.  Start following them.  Many times they will follow you back.  Then you need to start conversing with people regularly throughout the day.  Don't just “tweet” about your project.  This turns people off.  Talk about what's happening in your field.  Be an authority on your subject.  This will get more people to follow you.  Then you can start “slipping” in tweets about your project.  It's all a matter of gaining people's trust first.

Business Ideas Investors are Investing In

At a recent business finance meeting, well known business incubator owner and business finance provider Paul Graham was asked to comment on the type of business plans they are providing business finance for. Graham was very optimistic about the opportunity available to entrepreneurs and spoke about a wide range of of business plans they are interested to see more of.  This is something very useful to be aware of as an entrepreneur and important to consider of you are wondering what type industry or business to go into.

Not all of the businesses on the list will surprise you especially considering that Graham is mostly interested in Tech type of businesses but a number of the suggestions may very well fit into your area of interest. It was also interesting that such a wide variety of businesses are being mentioned giving a good indication as to the vast amount of opportunity for business finance available out there.

1. A cure for the disease of which the RIAA is a symptom. Something is broken when Sony and Universal are suing children. Actually, at least two things are broken: the software that file sharers use, and the record labels' business model. The current situation can't be the final answer. And what happened with music is now happening with movies. When the dust settles in 20 years, what will this world look like? What components of it could you start building now?

The answer may be far afield. The answer for the music industry, for example, is probably to give up insisting on payment for recorded music and focus on licensing and live shows. But what happens to movies? Do they morph into games?

2. Simplified browsing. There are a lot of cases where you'd trade some of the power of a web browser for greater simplicity. Grandparents and small children don't want the full web; they want to communicate and share pictures and look things up. What viable ideas lie undiscovered in the space between a digital photo frame and a computer running Firefox? If you built one now, who else would use it besides grandparents and small children?

3. New news. As Marc Andreessen points out, newspapers are in trouble. The problem is not merely that they've been slow to adapt to the web. It's more serious than that: their problems are due to deep structural flaws that are exposed now that they have competitors. When the only sources of news were the wire services and a few big papers, it was enough to keep writing stories about how the president met with someone and they each said conventional things written in advance by their staffs. Readers were never that interested, but they were willing to consider this news when there were no alternatives.

News will morph significantly in the more competitive environment of the web. So called "blogs" (because the old media call everything published online a "blog") like PerezHilton and TechCrunch are one sign of the future. News sites like Reddit and Digg are another. But these are just the beginning.

4. Outsourced IT. In most companies the IT department is an expensive bottleneck. Getting them to make you a simple web form could take months. Enter Wufoo. Now if the marketing department wants to put a form on the web, they can do it themselves in 5 minutes. You can take practically anything users still depend on IT departments for and base a startup on it, and you will have the enormous force of their present dissatisfaction pushing you forward.

5. Enterprise software 2.0. Enterprise software companies sell bad software for huge amounts of money. They get away with it for a variety of reasons that link together to form a sort of protective wall. But the software world is changing. I suspect that if you study different parts of the enterprise software business (not just what the software does, but more importantly, how it's sold) you'll find parts that could be picked off by startups.

One way to start is to make things for smaller companies, because they can't afford the overpriced stuff made for big ones. They're also easier to sell to.

6. More variants of CRM. This is a form of enterprise software, but I'm mentioning it explicitly because it seems like this area has such potential. CRM ("Customer Relationship Management") means all sorts of different things, but a lot of the current embodiments don't seem much more than mailing list managers. It should be possible to make interactions with customers much higher-res.

7. Something your company needs that doesn't exist. Many of the best startups happened when someone needed something in their work, found it didn't exist, and quit to build it. This is vaguer than most of the other recipes here, but it may be the most valuable. You're working on something you know customers want, because you were the customer. And if it was something you needed at work, other people will too, and they'll be willing to pay for it.

So if you're working for a big company and you want to strike out on your own, here's a recipe for an idea. Start this sentence: "We'd pay a lot if someone would just build a ..." Whatever you say next is probably a good product idea.

8. Dating. Current dating sites are not the last word. Better ones will appear. But anyone who wants to start a dating startup has to answer two questions: in addition to the usual question about how you're going to approach dating differently, you have to answer the even more important question of how to overcome the huge chicken and egg problem every dating site faces. A site like Reddit is interesting when there are only 20 users. But no one wants to use a dating site with only 20 users—which of course becomes a self-perpetuating problem. So if you want to do a dating startup, don't focus on the novel take on dating that you're going to offer. That's the easy half. Focus on novel ways to get around the chicken and egg problem.

9. Photo/video sharing services. A lot of the most popular sites on the web are for photo sharing. But the sites classified as social networks are also largely about photo sharing. As much as people like to share words (IM and email and blogging are "word sharing" apps), they probably like to share pictures more. It's less work and the results are usually more interesting. I think there is huge growth still to come. There may ultimately be 30 different subtypes of image/video sharing service, half of which remain to be discovered.

10. Auctions. Online auctions have more potential than most people currently realize. Auctions seem boring now because EBay is doing a bad job, but is still powerful enough that they have a de facto monopoly. Result: stagnation. But I suspect EBay could now be attacked on its home territory, and that this territory would, in the hands of a successful invader, turn out to be more valuable than it currently appears. As with dating, however, a startup that wants to do this has to expend more effort on their strategy for cracking the monopoly than on how their auction site will work.

11. Web Office apps. We're interested in funding anyone competing with Microsoft desktop software. Obviously this is a rich market, considering how much Microsoft makes from it. A startup that made a tenth as much would be very happy. And a startup that takes on such a project will be helped along by Microsoft itself, who between their increasingly bureaucratic culture and their desire to protect existing desktop revenues will probably do a bad job of building web-based Office variants themselves. Before you try to start a startup doing this, however, you should be prepared to explain why existing web-based Office alternatives haven't taken the world by storm, and how you're going to beat that.

12. Fix advertising. Advertising could be made much better if it tried to please its audience, instead of treating them like victims who deserve x amount of abuse in return for whatever free site they're getting. It doesn't work anyway; audiences learn to tune out boring ads, no matter how loud they shout.

What we have now is basically print and TV advertising translated to the web. The right answer will probably look very different. It might not even seem like advertising, by current standards. So the way to approach this problem is probably to start over from scratch: to think what the goal of advertising is, and ask how to do that using the new ingredients technology gives us. Probably the new answers exist already, in some early form that will only later be recognized as the replacement for traditional advertising.

Bonus points if you can invent new forms of advertising whose effects are measurable, above all in sales.

13. Online learning. US schools are often bad. A lot of parents realize it, and would be interested in ways for their kids to learn more. Till recently, schools, like newspapers, had geographical monopolies. But the web changes that. How can you teach kids now that you can reach them through the web? The possible answers are a lot more interesting than just putting books online.

One route would be to start with test prep services, for which there's already demand, and then expand into teaching kids more than just how to score high on tests. Another would be to start with games and gradually make them more thoughtful. Another, particularly for younger kids, would be to let them learn by watching one another (anonymously) solve problems.
14. Tools for measurement. Now that so much happens on computers connected to networks, it's possible to measure things we may not have realized we could. And there are some big problems that may be soluble if we can measure more. The most important of all is the defining flaw of large organizations: you can't tell who the most productive people are. A small company is measured directly by the market. But once an organization gets big enough that people on in the interior are protected from market forces, politics starts to rule, instead of performance. An improvement of even a few percent in the ability to measure what actually happens in large organizations would have a huge impact on the world economy, and a startup that enabled it would be entitled to a cut.

15. Off the shelf security. Services like ADT charge a fortune. Now that houses and their owners are both connected to networks practically all the time, a startup could stitch together alternatives out of cheap, existing hardware and services.

16. A form of search that depends on design. Google doesn't have a lot of weaknesses. One of the biggest is that they have no sense of design. They do the next best thing, which is to keep things sparse. But if there were a kind of search that depended a lot on design, a startup might actually be able to beat Google at search. I don't know if there is, but if you do, we'd love to hear from you.

17. New payment methods. There are almost certainly things whose growth is held back because there's no way to charge for them. And the people who could implement solutions don't realize how much demand there would be, precisely because this growth has been held back. So pretty much any new way of paying for things that's easier for some class of situations will turn out to have a bigger market than its inventors expected. Look at Paypal. (Warning: Regulated industry.)

18. The WebOS. It probably won't be a literal translation of a client OS shifted to servers. But as applications migrate to servers, it seems possible there will be something that plays a central role like an OS does. We've already funded several startups that could be candidates. But this is a big prize, and there will probably be multiple winners.
19. Application and/or data hosting. This is related to the preceding idea, but not identical. And again, while we've already funded several startups in this area, it's probably going to be big enough that it contains several rich markets.
It may turn out that 4, 18, and 19 all have the same answer. Or rather, that there will be things that answer all three. But the way to find such a grand, overarching solution is probably not to approach it directly, but to start by solving smaller, specific problems, then gradually expand your scope. Start by writing Basic for the Altair.

20. Shopping guides. Like news, shopping used to be constrained by geography. You went to your local store and chose from what they had. Now the space of possibilities is bewilderingly large, and people need help navigating it. If you already know what you want, Bountii can find you the best price. But how do you decide what you want? Hint: One answer is related to number 3.

21. Finance software for individuals and small businesses. Intuit seems ripe for picking off. The difficulty is that they've got data connections with all the banks. That's hard for a small startup to match. But if you can start in a neighboring area and gradually expand into their territory, you could displace them.

22. A web-based Excel/database hybrid. People often use Excel as a lightweight database. I suspect there's an opportunity to create the program such users wish existed, and that there are new things you could do if it were web-based. Like make it easier to get data into it, through forms or scraping.

Don't make it feel like a database. That frightens people. The question to ask is: how much can I let people do without defining structure? You want the database equivalent of a language that makes its easy to keep data in linked lists. (Which means you probably want to write it in one.)
23. More open alternatives to Wikipedia. Deletionists rule Wikipedia. Ironically, they're constrained by print-era thinking. What harm does it do if an online reference has a long tail of articles that are only interesting to a few people, so long as everyone can still find whatever they're looking for? There is room to do to Wikipedia what Wikipedia did to Britannica.

24. A buffer against bad customer service. A lot of companies (to say nothing of government agencies) have appalling customer service. "Please stay on the line. Your call is important to us." Doesn't it make you cringe just to read that? Sometimes the UIs presented to customers are even deliberately difficult; some airlines deliberately make it hard to buy tickets using miles, for example. Maybe if you built a more user-friendly wrapper around common bad customer service experiences, people would pay to use it. Passport expediters are an encouraging example.

25. A Craigslist competitor. Craiglist is ambivalent about being a business. This is both a strength and a weakness. If you focus on the areas where it's a weakness, you may find there are better ways to solve some of the problems Craigslist solves.

26. Better video chat. Skype and Tokbox are just the beginning. There's going to be a lot of evolution in this area, especially on mobile devices.

27. Hardware/software hybrids. Most hackers find hardware projects alarming. You have to deal with messy, expensive physical stuff. But Meraki shows what you can do if you're willing to venture even a little way into hardware. There's a lot of low-hanging fruit in hardware; you can often do dramatically new things by making comparatively small tweaks to existing stuff.
Hardware is already mostly software. What I mean by a hardware/software hybrid is one in which software plays a very visible role. If you work on an idea of this type you'll tend to have the field to yourself, because most hackers are afraid of hardware, and most hardware companies can't write good software. (One reason your iPod isn't made by Sony is that Sony can't write iTunes.)

28. Fixing email overload. A lot of people, including me, feel they get too much email. A solution would find a ready market. But the best solution may not be anything as obvious as a new mail reader.
Related problem: Using your inbox as a to-do list. The solution is probably to acknowledge this rather than prevent it.

29. Easy site builders for specific markets. Weebly is a good, general-purpose site builder. But there are a lot of markets that could use more specialized tools. What's the best way to make a web site if you're a real estate agent, or a restaurant, or a lawyer? There still don't seem to be canonical answers.

Obviously the way to build this is to write a flexible site builder, then write layers on top to produce different variants. Hint: The key to making a site builder for end-users is to make software that lets people with no design ability produce things that look good—or at least professional.
30. Startups for startups. The increasing number of startups is itself an opportunity for startups. We're one; TechCrunch is another. What other new things can you do?

As mentioned these ideas were mentioned in an interview with Paul Graham from Y-Combinator, a site probably well worth checking out if any of the above may fall into your area of expertise or interest. Make sure that you do your homework on what they would want to have included in your business plan and financial forecasts. And as always be proactive!

Ground-Breaking Technology Takes Writing a Business Plan to a New Level

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Getting your idea off the napkin or post-it and into a business plan which covers every aspect that investors might be interested in, has always been a significant struggle for first-time entrepreneurs to overcome or master.

Globally, the Total Entrepreneurial Activity (TEA), measures the Entrepreneurial Activity as a percentage figure of GDP (Gross Domestic Profit) for a specific year, per country. The Gordon’s Institute of Business reports that between 2001 and 2009, South African TEA figures reported an average of 6.4%, which dropped significantly in the 2009/2010 economic retraction, with the result that SA figures reflected a 5% TEA. As a result of this, more emphasis is now being put on assisting entrepreneurs through various programs.

SA Start-up Systems, a home grown and proudly South African company, launched a new product to assist you in overcoming the hurdles to success. With over twenty years of experience in financial and business planning as well as SME support, they are well versed in the requisites placed on a proper business plan.

Business Plan Whiz was created on local soil, by entrepreneurs, for entrepreneurs. This unique software package includes a magnitude of features that will not only take your idea and put it into a business plan, but enhance it by adding value and giving you the complete solution with which to attract investors.

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