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'Crowd funding' websites provide entrepreneurs funding needed to start business

Tuesday, February 12, 2013

All of us at one time or another have dreamed of starting our own business or finishing a project that's been stuck in our head for a long time and the one thing always in the way is funding. But the funding is there, and some folks are getting it from complete strangers.

As a vegan food truck set up in an urban community, Green Seed Vegan became an unlikely quick success in the Third Ward community when Maddi Merrell opened it in 2011. But when she dreamed of expanding to a traditional restaurant a year later, she faced the financial challenge nearly all first-time entrepreneurs face -- no money.

Merrell turned to strangers online who gave between $1,000 and $10,000 each.

"We raised 13,313 in 30 days," Merrell said.

One of the hottest trends in funding is called crowd funding. Websites like Kickstarter, Fansnextdoor, Indiegogo and MicroVentures link investors with entrepreneurs and are estimated to have raised $3 billion last year. The investors get no equity, just token "thank you" gifts.

"We gave them T-shirts, we gave them stickers. We gave them a week's worth of lunch. We also did little raw treats and we also gave some people the option of having menu items in their honor," Merrell said.

So how can you get money to fund your business idea? First, pick the right website based on your plan. They each have different criteria. Most offer a template to help you outline a business plan and estimate your expenses. But remember to add about 4 percent -- the fee many sites charge.

Then you have to make a video presentation, which you'll use to pitch your project via social media. Hope you have a lot of online acquaintances, because they'll help drive up interest in your project and generate the buzz you need.

Most sites require you to have a clear ending date for fundraising. If you aren't fully funded by then, you may not get any of the pledged money. So break your project up into manageable segments.

While most request a few thousand dollars, one multipurpose watch company collected $10 million, more than they requested.

"We actually did not have to use credit cards or anything. We were totally able to open our brick and mortar with Kickstarter, which is really great," Merrell said.

Merrell is just getting started. After the buy in and kindness of strangers from New York to Portland, she wants to open a second restaurant. It appears her appetite for entrepreneurship is just beginning.
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