Crowd Funding has been around for a while. In very simple terms, you sign up with a crowd funder (such as Kickstarter), list how much money you want to raise for your project, company, etc. and then use social networking to get people you know and others to contribute. This is in addition to people who will visit the site looking for interesting projects. If you reach your goal you get your money. If you don’t, you don’t.
The good news about crowd funding for your business is that you don’t have to give up a percentage of your business to the contributors – when you use other fundraising methods, you always have to give up a percentage of your business as well as a percentage of control. Because of the good will involved with those who make crowd funding contributions, many people who are raising money offer something in return (like a product sample, a coupon, admission to a film screening if you’re making a film, etc.).
It’s a great process if you succeed. In order to succeed, however, you may have to give up huge chunks of time you would normally be devoting to your company.
The bad news is that crowd funding is not regulated officially so there’s ample room for fraud. BE CAREFUL WHO YOU DEAL WITH. If you decide to investigate and use this route, make sure you go with a known name like Kickstarter.
This link will provide a good primer on crowd funding and other information that you may find of help.
Sandra Holtzman teaches CEO 035: Licensing.