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How Much Funding Should You Raise?

Most businesses need to raise external funding from investors to take their company to the next level. An early stage startup will want to access funds to help further validate its business proposition. A more established business that already has traction may be looking for funding to help accelerate growth. Whatever stage your business is in, if you are seeking investment, determining how much funding you should raise is absolutely critical. The dangers of raising too little : Incorrectly assessing your funding need has serious repercussions on your business. It will lead to inadequate validation of your proposition, or to executing growth initiatives that do not materially move the needle. Whatever the case, the business is left in limbo. The dangers of raising too much : So, raising more funds than are needed is the right approach to take, right? Not necessarily. Just as raising too little is risky, raising too much funding is fraught with its own dangers. More from Bplan

The basics of Crowdfunding

What it is: Crowdfunding is about persuading individuals to each give you a small donation -- $10, $50, $100, maybe more. Once you get thousands of donors, you have some serious cash on hand. This has all become possible in recent years thanks to a proliferation of websites that allow nonprofits, artists, musicians -- and yes, businesses -- to raise money. This is the social media version of fundraising. There are more than 600 crowdfunding platforms around the world, with fundraising reaching billions of dollars annually, according to the research firm Massolution. Crowdfunding Basics

Challenges with Crowdfunding

It seems that almost every day, there's another startup proudly announcing that it has reached its crowdfunding goal. With so many success stories out there, it's easy for other aspiring entrepreneurs to believe that sites like Kickstarter are their golden ticket to launching a business. But the reality is, crowdfunding isn't always as simple as it seems. "New entrepreneurs often believe that crowdfunding their venture or project is an easy endeavor," said Sang Lee, founder and CEO of Return on Change. "However, it requires much groundwork as well as a strong support network to truly make it a success. As they say, there's no such thing as a free lunch." Crowdfunding Challenges

All About Nonprofit Funding

Fundraising is key to success as a nonprofit.  But fundraising is a complicated process.  The Free Management Library provides a wealth of information that can teach you All About Nonprofit Funding . This website will help nonprofit leaders and staff learn and understand the various/varied elements of fundraising, to recognize the importance of the relationship between an organization and its potential donors, and to construct and implement a strong fundraising plan/program for their nonprofits. In addition, much of the subject matter will help nonprofit leaders and staff recognize what it is that they don't know about fundraising, and how to remedy that situation.

Even Crowdfunding Cannot Escape From Uncle Sam

From here : When it comes to crowdfunding, most people forget that there are tax implications. Did you really think Uncle Sam would give you a pass? Everyone who raises money through crowdfunding will be taxed as it is considered revenue. There is one exception to the rule, however, and that is either you are a registered non-profit 501(c)(3), or you have secured an authorized fiscal sponsor to chaperon your fundraising campaign. So when you do plan your crowdfunding campaign, check to see if you would be eligible for a tax-exemption. Basically, there are three taxable ways money raised in crowdfunding can be categorized: Sales Tax, Income Tax, or Gifts.

For Non-Profits

Based on SBA guidelines, SBDCs at one time couldn't really assist not-for-profit organizations. Now, however, they can. One of my favorite resources is Guidestar.com. The October and November issues featured the article "20 Biggest Fundraising Mistakes", some of which apply to for-profit businesses as well, such as Failing to Set a Realistic Goal and Failing to Have Deadlines.

Real Applications of the Social Network/Auction

Lending and Borrowing from the General Public YOUR MONEY Person-To-Person Lending Flourishes on Web by Jessica Smith Morning Edition, NPR , November 2, 2007 “Welcome to the era of coffee shop money lending.” I read this story on NPR.org about person-to-person lending on the Internet which just seemed like an amazing idea. It is fascinating that this exists and that it seems to work. The idea is that a person writes a profile of how much they want to borrow and for what and what their top limit on the interest they are willing to pay and then people bid on the loan request. The borrower is vouched for by friends, colleagues or family and the amount raised from various lenders is consolidated by Prosper.com and then the money is distributed. These are not small loans either- they can run from $50 to $25,000. It seems a risky proposition but interesting to see how people will take things into their own hands. Prosper.com "Prosper generates revenue by collecting a one-time 1% or 2% f