O.K., that’s not quite everything because you now have a product that’s ready to go but no actual inventory to start selling. Now what?
This is where the next step comes in: finding funding for your idea. And it’s a rather important stage.
Top Crowdfunding Sites
The good news? Once again, the internet has come to our rescue and made this all as easy as it possibly can be. And in this case, in particular, we’re going to be using ‘crowdfunding’ to make our money.
Crowdfunding simply means that we’re asking the community to fund our projects, and the most famous example of this is Kickstarter (www.kickstarter.com). The best part is that you don’t have to give away any percentage of your business or your profits – backers on crowdsourcing sites get involved because they want to place pre-orders and because they want to see your ideas come to fruition. This is famously how projects like the Oculus Rift came into being.
Finding an investor means giving away a share of your business, getting a loan means taking a serious risk. But crowdfunding? There are zero risks and no downside. And this is why more and more makers are now finally able to see their ideas come to fruition when previously it would never have been possible!
There are other crowdsourcing options out there though and other funding options too.
The most obvious place most people will start is Kickstarter which is the best-known crowdfunding site on the web and possibly largely responsibility for the strategy's current popularity.
While Kickstarter might be the most famous and provide you with access to the biggest number of potential backers, this can also be a bad thing in that it means you'll be facing more competition and will need to follow stricter guidelines. Indiegogo then provides a slightly more 'lightweight' alternative where it can be easier for beginners to get noticed.
Kickstarter rules the roost in the US, but until recently it was less accessible for those based in the UK and Europe. Peoplefund.It aimed to take advantage of this by focusing on the UK market and has now found a niche as a great place for charities to raise money and for British entrepreneurs to find backing.
Smallknot is a relatively young crowdfunding site that looks at businesses rather than projects and encourages users to invest in small local organizations.
RocketHub functions largely similarly to Kickstarter but has become particularly popular among musicians and philanthropists.
Note that crowdfunding sites do have their drawbacks and limitation. For instance, crowdfunding only works if you can raise the money you’ve set yourself as a target (at least that’s the case with Kickstarter, Indiegogo does not have this rule). These platforms are also becoming increasingly saturated, which means you’re going to need to have a very good and unique idea and then do a lot of promotion on top of this to make it a reality.
Other Funding Options
There are likewise many more funding options for raising capital. One option is simply to find investors, and there are many websites that can help you to do this too. For example, ‘AngelList’ is a website that works similarly in some ways to a CrowdFunding site, except that the investors do get some money and some share of your business. However, they can back you with small amounts of cash which mean that you’re not only approaching massively wealthy individuals and companies. Creating a profile on AngelList is a great way to learn about investors and let them start getting to know you, even if you don’t end up looking for money on the site. Other sites like CrowdCube and Angels Den can also do similar things.
Note that it’s also possible to get funding at other stages of your manufacturing. For example, you can get funding from business angels and ‘accelerators’ (look at companies like TandemCap.com and HAX.co) at the preseed stage of your business – the point where you’re still prototyping!
Seed capital is the money you get to turn your idea into a reality – the ‘industrialization phase.' At this point, you can get money from crowdfunding or investors, after which you enter the ‘growth phase.' Growth phase funding is what happens in the first few years of your business and is referred to as Series A, Series B, and Series C funding. Series A tends to raise anything from $1-10 million and is riskier for investors as you don’t have as many data backing your potential for success. Then you have series B, which is mainly about scaling. You can bring in much more money at this stage. Finally, series C is for the fully mature business, at which point an acquisition might even be on the cards which are ideal if you’re looking for an exit strategy.
After this comes the ‘IPO’ or your ‘Initial Public Offering.' At this point, you can consider your business a roaring success… you don’t need me helping you anymore!
Finding Funding for Small Projects
Otherwise, you can find other ways to fund smaller projects. One option is ‘bootstrapping’ which means earning capital from a side business and funneling this into your hardware manufacturing. Alternatively, you can get a bank loan – even PayPal (www.paypal.com) offer business loans now – or you can even use a credit card loan.
Just make sure that you have tested the market for your product and you know you’re going to make your money back if you’re going to take out loans!
Then there’s always the Bank of Mum and Dad, or friends and family. If you have a good idea, they might want to be a part of it.