Wall Street Journal Recommends Crowdfunding for Hardware and Software Startups

15 Jan

Start With Family, Incubators and Crowdfunding Sites

by Kevin Colleran

Wall Street Journal (1/15/13) – One of the very first hurdles that a new entrepreneur faces is how to find the initial capital necessary to fund the process of building a company. Most entrepreneurs begin using their own money for the initial costs. Eventually, however, the time comes that it no longer makes sense (or is no longer possible) to continue doing this. At this point, entrepreneurs need to figure out a strategy to raise the funds necessary while minimizing disruption of day-to-day business operations. If done incorrectly, fundraising can be incredibly distracting and difficult for the entrepreneur, and can slow any initial momentum that the business has attained. The best options for finding initial angel and seed investors are friends and family, incubators, professional investors and crowdfunding.

A new-but-growing segment of angel and seed investment is crowdfunding. This approach involves a business receiving advance micropayments from the end consumers who will eventually benefit from the product or service being created by the startup company. The most well-known platform for crowdfunding is Kickstarter.com, which has been used successfully by both hardware and software companies (along with those in the music, art, fashion, film and publishing worlds). The reality is that very few companies can break through the clutter and gain recognition within these systems, but those who do have the unique benefit of knowing that they have an eager fan base of focus-group consumers waiting for their product or service to launch. In the end, that can be an invaluable benefit.

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