Challenges Most Startups Business

It seems that almost every day, there’s another startup proudly announcing that it has reached its crowdfunding goal. With so many success stories out there, it’s easy for other aspiring entrepreneurs to believe that sites like Kickstarter are their golden ticket to launching a business. But the reality is, crowdfunding isn’t always as simple as it seems.

“New entrepreneurs often believe that crowdfunding their venture or project is an easy endeavor,” said Sang Lee, founder and CEO of Return on Change. “However, it requires much groundwork as well as a strong support network to truly make it a success. As they say, there’s no such thing as a free lunch.”

Whether you’re looking to raise a small amount of startup cash or acquire a larger sum through equity crowdfunding, there are a few challenges you might face during the process that you may not have expected. Four crowdfunding platform executives shared the four biggest challenges that entrepreneurs face during their campaigns.

While all crowdfunding platforms serve the same purpose — raising money online from multiple donors and sources — not all of them are created equal. Consumer-use platforms like Kickstarter or Indiegogo are great for raising smaller amounts of money, but equity crowdfunding portals are best for entrepreneurs looking for sums in the millions. If you’re interested in the latter, it’s important to do your research and find the platform that will meet your needs.

“For new entrepreneurs, the biggest challenge is accessing investors to fund the capital ventures,” said Matthew McGrath, CEO of Optimize Capital Markets. “There is an enormous number of investors who are willing and seeking to invest in these startup companies. It’s a matter of allocating the opportunity.”

McGrath advised thorough and diligent research into the size of the crowdfunding marketplace, the types of investors who are active, which sectors the portal focuses on, etc. From there, you can make an educated decision about the right portal to use. Choosing the wrong one can result in a loss of time, money and value, he said.

Planning a realistic goal amount and time frame

Many entrepreneurs, especially those new to the crowdfunding scene, tend to think that they will be able successfully raise all the money they need and then some by the time their campaign ends. It’s important to be realistic about time and money when it comes to planning your campaign.

“One challenge area is when to begin raising [money] and how much to target via the crowdfunding site,” said Shereen Shermak, CEO and fund manager Launch Angels. “Entrepreneurs often don’t have a rule of thumb of how long a runway to create.”

Consider how much capital you would need to take your business to the next major proof points, Shermak said. This is the starting point for the magnitude of your crowdfunding campaign.

“Entrepreneurs often believe that the crowdfunding sites will take over the fundraising process,” Shermak added. “They should instead be prepared to fundraise in parallel to the online raise. This will create momentum for the online raise.”

Building interest

So you’ve got a great business idea, and all your friends and family think it’s great, too. That means the donations will come pouring in once you launch your campaign, right? Not necessarily. Doing a lot of prep work before your campaign will help create and maintain interest in your project.

“Gauging interest for your investment opportunity or project is a critical part of the process before you start mass blasting via social media,” Lee told Business News Daily. “This implies an allocation of time as well as resources both beforehand and during the campaign. It’s definitely a process that requires budgeting out the time and the manpower needed to have a successful fundraising campaign.”