Is lack of cash the only thing preventing you from releasing a CD of your music, turning your hand-knit scarves into a business, or opening an artists' cafe? If so, then it's worth checking out the new generation of "crowdsourced" funding sites.
These gathering places enable entrepreneurs in artisanal and creative businesses to collect small donations from friends, family and acquaintances to bring a project to fruition. Typically, fund seekers will post information about a creative project on one of the sites, then reach out to their networks on Facebook, Twitter and other social sites to ask for donations ranging from around $10 to $100, and sometimes more. Some sites, like Kickstarter and IndieGoGo, are open to a range of creative projects. Others, like the music-focused SellaBand, specialize in a particular niche.
Why would anyone hand over money this way while we're in choppy economic waters? Similar to old-fashioned patrons of the arts, many people today enjoy helping talented people bring creative projects to life. "The bigger the network and fan base, the higher the probability they will find success with crowdfunding," says Brian Meece, co-founder of RocketHub, a nine-month-old New York City-based site where entrepreneurs and artists have so far raised $200,000 for their projects in total. Meece, author of the Crowdfunding Manifesto, shared some tips recently on how to raise money on these sites. Here is his insider's advice.
Know why your project matters
If you're clear on why you want to complete it — and can convey this in your written description — you're likely to find a lot of supporters. "Oftentimes, the passion will be contagious," says Meece. Videos can be a great way to tell your story, he says. (The most successful fund raiser on RocketHub was an indie film maker who came away with $10,000).
Meece encourages those who raise money on RocketHub to offer their financial supporters something meaningful. A good example, he says, is an entrepreneur who put the names of her donors on a plaque in a tea shop that she upgraded using funds she raised on the site. "It's a matter of offering really cool, engaging things back in exchange for financial contributions," he says.
RocketHub, like some of the other crowdfunding sites, requires you to set a target date for meeting a funding goal you set. If you don't raise the total amount, you forfeit everything. As a result, it is important to set a goal that's achievable in the time frame you pick. For guidance, Rockethub offers a page to help you determine the difficulty level of various funding goals.
Think hard about the length of your campaign, he advises. The optimum length for most projects is 30 to 60 days, but sometimes, a 75-day campaign will work well for bigger-budget projects, says Meece. "Any longer than that and the campaign loses its impact and urgency," he says. Ideally, they'll come away feeling like they got involved in a great project while there was still time — not ruing the day they friended you on Facebook.
Elaine Pofeldt is an independent journalist specializing in entrepreneurship whose work has appeared in TheAtlantic.com, BNET, Crainís New York Business, CBS Moneywatch, Good Housekeeping, Inc., Working Mother and many other publications. A former senior editor of Fortune Small Business magazine and editor of its website, she does editorial consulting for online and print publications.