So you’ve got an idea for a business, something you can run to bring in some extra cash while you’re studying, but you need some money to get you started. What do you do?
Ask the bank?
Even without the current economic climate, a young person, perhaps with student debt and no previous business experience is unlikely to come out of that conversation with a cheque book, a loan and an overdraft facility.
The bank of mum and dad is usually open for business, but what if you need a couple of thousand pounds, rather than just a couple of hundred?
There is another option.
Crowdfunding is an alternative source of funding. It’s a global phenomenon that has changed the way start-ups, student enterprises, social and community projects raise money. It’s simply tapping into the online crowd – your network of friends and family, and their network and beyond – to ask for donations of cash in return for rewards.
Crowdfunding has developed rapidly over the past few years, driven by the maturing social media ecosystem, including Facebook (500 million active users), Twitter (more than 175 million active users) and LinkedIn (more than 100 million registered users spanning more than 200 countries and territories worldwide).
It is remarkably simple but incredibly effective, it is micro patronage, or grassroots funding; tens, 100s or 1,000s of people donate £10, £15, £50, £100 or more to ventures in return for treats, gifts, even a simple, public ‘thank you’.
Companies like Kickstarter and Indiegogo, both in America, have raised millions of dollars for start-up businesses, and there has been a number of successful high profile examples; you might remember that Barack Obama crowdfunded his election campaign, and a group of young entrepreneurs in America raised just shy of $1m to prototype and manufacture the TikTok watch strap, designed for the iPod Nano. You can now find this product in Apple stores worldwide.
As inspirational as massive success stories like this can be, crowdfunding works just as well – and often better – for smaller ventures, for ordinary people with a good idea, and particularly for young people and students.
Bloom VC (the VC stands for Venture Catalyst), is the newest crowdfunding platform to launch. Based in Scotland, Bloom allows someone with an idea to post a project from anywhere in the world and receive donations from anywhere in the world.
Under the Bloom model individuals or startups create an online elevator pitch for their idea, detailing what it is, why it’s important, how much money is needed and for what. Using video and images to create a compelling story and offering exciting and attractive treats in return for donations, the pitch is then
uploaded onto the Bloom site where the project idea owners share it with their social networks, both online using Twitter, Facebook and LinkedIn and offline amongst friends, family, neighbours and colleagues.
Each project has up to 60 days in which to raise the funds. If they fail, they don’t receive a penny, but if they succeed or even raise more than requested they get the whole lot.
The promises of money are not charitable donations, nor are they investments or loans. The project owner or young entrepreneur is not expected to give up equity in their fledgling business nor pay anything back, instead they maintain complete control over their work or business.
Even if you don’t have an idea for business, you can use crowdfunding to support a community project or social enterprise in your area.
Consider the impact of what you’re doing as a unique feature on your CV. You can demonstrate commitment to your community, a willingness to change things for the better, a practical approach to problems, a determination to see something through from start to finish, an interest in more than your Xbox.
The experience will stand you in good stead for the future, you’ll learn to manage a project, possibly lead a team, communication and problem solving skills. Ultimately, you’ll make a difference to your community.
So what are you waiting for? What could you do?
Michelle Rodger is the Chief Communications Offer at BloomVC. BloomVC is the first crowdfunding venture of its kind in the world, helping you raise money to realize your dream of starting your own business or community venture.
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