Small Business: Crowd-funding campaigns

The collective power of the crowd is helping The collective power of the crowd is helping finance an East End vineyard and its plans to plant unusual grapes. Photo Credit: iStock

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Jamie Herzlich Newsday columnist Jamie Herzlich

Herzlich writes the Small Business column in Newsday. ...

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It's the collective power of the crowd that's helping fund the Meadors' dream of starting an East End vineyard.

Their Kickstarter campaign, called Bring Weird Grapes to the North Fork, raised more than $24,000, exceeding their initial fundraising goal of $15,000 to plant an acre of Teroldego and other uncommon grapes.

Raising funds via crowd-funding was a great alternative to a bank loan, they said.

"We're trying to be smart on how we start this business, and that means keeping our debt low," says Regan Meador, who along with his wife, Carey, co-owns Southold Farm + Cellar. They were also able to build a community around their business before starting.

Crowd-funding sites like Kickstarter.com are growing in popularity as individuals and businesses look to raise small amounts of funds from a large group of people -- hence the crowd. Many of the sites allow you to raise funds without having to give up equity or ownership interest. Backers instead get other rewards, like T-shirts and private viewings.

But thanks to the passage of the JOBS Act last year, businesses should soon be able to solicit equity financing from the public at large via SEC-approved online crowdfunding portals. The Securities and Exchange Commission has yet to issue final regulations.

The SEC had 270 days from the signing of the act in April 2012 to set forth rules and regulations, says David Marlett, the Dallas-based executive director of the National Crowdfunding Association, an industry organization.

The SEC didn't specifically comment on causes for the delays, but spokesman John Nester said in an email: "The Commission and staff are working hard to write effective rules as soon as possible and appreciate the insights provided by crowdfunding advocates and other stakeholders that are guiding our efforts."

Marlett is hopeful oversight guidelines will be issued this year, but he says it's prudent not to rush it.

Examine what's out there. In the meantime, business can learn from existing crowdfunding sites on what constitutes a successful campaign, he says.

"Let's not forget there's hundreds of millions of dollars going through reward-based crowdfunding" sites such as Kickstarter and Indiegogo, notes Marlett.

On Kickstarter alone, about $533 million has been pledged by more than 3.6 million people since launching in April 2009. About 44 percent of projects reach their funding goals, says spokesman Justin Kazmark, noting that 19 Long Island-based campaigns are currently on Kickstarter.

Among Kazmark's tips for success: clearly articulating what you're hoping to accomplish; including a video; and offering thoughtful and compelling rewards.

"There's always a value exchange on Kickstarter," he says. "It's not a donation."

The Meadors offered different rewards for different contribution levels (for $75 or more, backers got an "I Like Weird Grapes" T-shirt and admission to the vineyard's Planter's Club).

Learn from other campaigns. Look at existing campaigns on these sites to get ideas for your own, suggests Regan. And try to get initial core fans on board before soliciting the public.

"Leverage your supporters," says John Murcott, co-founder of Karma411.com, a Hicksville-based crowdfunding site raising money for nonprofits. About 1,000 nonprofits have raised about $50 million through Karma411 since 2009.

Look for supporters' help beyond just their capital, he advises. "Don't just ask supporters for money, ask them to spread the word to help you raise the money," says Murcott. "You can't do it all yourself."

Also, set an aggressive goal, he says.

"If you think you could raise $10,000, then go for $15,000," he notes.

 

Fast Fact:

 

536: The estimated number of crowdfunding platforms worldwide as of December 2012.

Source: Crowdfunding Industry Report; Crowdsourcing.org; Massolution

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