Websites connect projects, supporters ; Crowd: Websites catering to niches [Topeka Capital Journal (KS)]
(Topeka Capital Journal (KS) Via Acquire Media NewsEdge) A few years ago, people looking to raise money had a few basic options: banks, friends and family, or maybe a bake sale or 5K run, if the cause was charitable.
Now, aspiring artists, business owners and others are turning to online platforms to connect with people who have money and want to support them. In Topeka, online funding supported people writing novels, recording CDs, designing science smartphone apps and sending a group of high school students to Scotland -- and that only includes projects on Kickstarter, one of a variety of sites connecting people through "crowdfunding," a term for raising money from people who aren't part of the typical lending infrastructure.
Will Spann, of Perry, is trying to raise $210,000 via Kickstarter to turn an undeveloped piece of property near Lake Perry into a market and bakery, called Red Table Farmers and Traders Market. He estimated about $190,000 will be left after fees to go toward clearing trees from the property, building two 100-foot-long structures and a greenhouse and setting up plumbing and restrooms.
Kickstarter has sections where people with ideas for a project can describe their plan, how they would use any money that was donated and any risks associated with the project. People seeking funds often offer incentives to anyone who donates more than a certain amount; in Spann's case, for example, people who donated $25 or more can get six free cookies or cupcakes.
Spann said he had previously supported other people's projects on Kickstarter, and he wanted to build a community of people interested in supporting his market idea. Finding backers online functions as a form of advertising as well as fundraising, he said.
"Crowdfunding basically gives you an opportunity to expose your project to a wider audience," he said.
Lisa Roberts, marketing and product manager for the statewide Small Business Development Center network, said crowdfunding got started mostly with charitable or artistic projects, and sites would allow potential donors to give just for the joy of it or in exchange for a gift or special recognition in the project. Now, some sites are attempting to connect investors looking for a return with people attempting to fund a business, she said.
Sites have developed niches, with Indiegogo and Kickstarter typically attracting projects with an artistic bent, Crowdrise specializing in charitable donations, Crowdfunder catering to businesses seeking donations or loans and Somolend focusing only on the loan market. Picking the right site is key to getting the funding you need, Roberts said.
"The power of crowdfunding is the crowd," she said. "So what crowd are you drawing?"
Kansas has reduced barriers to crowdfunding by allowing some exemptions to rules requiring aspiring business owners to register with the state to sell a stake in their business, but people still need to carefully consider what they can offer and what potential investors will expect, Roberts said.
Investors looking for a return may expect a role in making decisions about the business, Roberts said, so business owners need to make it clear what they can expect from the beginning. On the other side, donors and investors need to understand that they may not get anything if the idea isn't fully funded and doesn't go forward, she said.
"Probably one of the biggest pitfalls is summed up in one word: expectations," she said.
The federal Securities and Exchange Commission has begun tackling the issue of crowdfunding with rules to govern equity funding, which involves an investor buying a share of a company. Crowdfunding via donations wouldn't be affected by the new rules.
Even if a person doesn't raise all of the money he or she hoped to, crowdfunding platforms force them to hone their way of presenting an idea, Roberts said. Many projects compete for potential donors' and investors' attention, she said, so those seeking funding have to figure out how to grab their attention quickly and hold onto it.
"I see it first and foremost as a marketing opportunity," she said. "You really have to nail down why they should do business with you and why they should believe in you and your product."
Raising some money that way also can provide potential business owners, or owners of existing businesses looking to expand, with enough capital that a bank is willing to make a loan to them, Roberts said. Lenders typically want to see that borrowers have some skin in the game before risking their money, she said, and demonstrating that you have a community of future customers helps too.
"A traditional lender could be asking for anywhere from 10 percent of what you want to borrow," she said.
To view Spann's project or donate money, visit www.kickstarter.com, click on "Discover great projects," and search for Lawrence, Kansas. The project will be on the site until 6:06 a.m. Oct. 5.
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