Written by Shiva Prasad, CFO, Lawrence Blake Group International.
The nature of the American capitalist economy has always encouraged start-up businesses and continues to do more than ever. Start-up businesses, however, are as rapidly evolving as technology itself. Traditionally, small businesses and start-ups have been associated with terms like individual equity, partner equity, venture capital, angel investors, etc. Small businesses revolve in a world of their own and are often financed by individual/partner equity – personal money. For decades, the idea of a start-up business has revolved around the idea of either using one’s own professional circle and his/her own finances or looking towards more extravagant ideas such as angel investors and venture capital. But all of that has changed.
While it’s certainly important to note that the traditional sources of financing still hold quite the value in the start-up arena, there are a lot more opportunities that allow start-ups to explore safer and smaller scale options. Consider, for example, the idea of crowdfunding. Crowdfunding is quite a simple idea, but it really only took off in the past few years enabled by the growing relevance and presence of the internet.
Crowdfunding relies on generating the necessary finances for an idea to reach implementation from money invested or donated from, what is essentially the entire world. The concept is quite simple and it revolves around entrepreneurs proposing their business ideas hoping to garner attention from the crowd of investors and donators. The simpler model of the donators relies on individuals donating money towards a proposed business idea in return for some products, services, or other relatively minor benefits. The more complex investment based model of crowdfunding relies on debt and equity sale. Simply put, investors can choose to either lend money or invest in the idea by purchasing a part of the equity of the proposed business. This is very much a replica of the greater investment world in general; however, it is much more accessible to the smaller business models.
Traditionally, start-ups have always had a boom or bust approach. Simply put, start-ups were created with the intention of taking off and turning into large, public companies. While the entrepreneurial spirit hasn’t changed, concepts like crowdfunding are enabling more entrepreneurs to find a mid-ground or the gray area between the boom or bust. More and more start-ups are able to thrive in a space that is ideal for their mission and vision rather than striving for perennial growth and a hope to go public on a prestigious stock exchange. The start-up world is far more inviting to success at various levels than it once was.
If you’re struggling with trying to find sources of funds for your idea, it’s time for you to explore some of these start-up communities. Check out the list below to get an insight on some of the more successful communities.