This is our first official Strategy Session post. What we want to do is throw an idea out there and spark some dialogue about how to make it work in the marketplace; if you have any ideas leave a comment, Tweet us (@LumosBusiness) or email us.
The world is changing – fast! While news of bank failures and corporate scandals may dominate the headlines of most business sections, a new paradigm is emerging in business that centres around social innovation, crowdfunding and the new economy. If you were one of those people who thought the iPhone was revolutionary, wait until you see what happens when this stuff hits the market. Which is why we are focusing our first ‘Strategy Session’ on Crowdfunding + Social Enterprise, as we believe the combination will help produce a whole new breed of businesses.
If you haven’t read any of our blogs up to this point, you should know that we absolutely love social enterprises (see blog post Social Enterprises and the Rise of the Impact Entrepreneur) and crowdfunding (see blog post Finance 2.0 – Wall Street meets the Web). What gets us even more excited, however, is the opportunity to combine the two. In other words, we want to look at ways to use crowdfunding to launch social enterprises.
So where do we start?
Let’s assume that you are an entrepreneur in one of two scenarios:
- you are an individual who is passionate about a certain social cause and you want to launch your own social enterprise
- you are a social entrepreneur with a new social enterprise and have no financial backing other than your own resources
In either scenario, there are two imminent challenges that you face as an entrepreneur:
- how do you fund your social enterprise?
- how do you develop a business model that will allow your social enterprise to be self-sustainable?
For the first question, theoretically there are several possible answers (friends and family, grants, etc.), but in today’s world these options are becoming less and less viable. So we are going to look at a strategy to launch your venture using crowdfunding:
- you launch a crowdfunding campaign with the goal of raising enough money to get your social enterprise off the ground
- you offer unique rewards to people that are directly tied to your social enterprise in order to incentivize participation and sharing: this could include product/service presales, special event invitations, exclusive content access, meet the team, etc.
- you create your crowdfunding strategy in a way that allows you to raise money from people in both your immediate networks (typically the first 25 – 30% needs to come from friends and family for successful campaigns) and outside of your network (potential customers, social organizations, corporations, etc.)
What will be accomplished?
First of all, you will raise enough money to get your idea off the ground in the cleanest, simplest way possible. There is no equity to distribute, forms to fill out, etc. Secondly, it will allow you to test demand and get some feedback as to how well received your idea is in the marketplace. Thirdly, and most importantly, you will develop ambassadors, spokespeople and salesmen for your social enterprise.
All of this is very important for many reasons, but one in particular is that it will give you time to develop an answer for question number two – how do you develop a business model that will allow your social enterprise to be self-sustainable?
We believe that the social enterprises that will achieve maximum impact in the years and decades to come will have their own self-sustaining business model. This way, they won’t be reliant on outside funding to survive, they will be able to self-adjust to market forces and they will be able to raise strategic capital to scale when the time is right.
Developing a business model (learn about The Key Components of a Business Model), however, takes time and testing. Raising money and developing a strong community via a crowdfunding campaign is a great way to buy yourself the time to be able to test out a business model.
All that being said, to successfully fund a project on a crowdfunding platform is easier said than done. Most people think you just put the project on the selected platform and oila! – you’re funded. Unfortunately, it’s not like that.
If you are interested in developing a strategy for your first crowdfunding campaign, first of all read our blog post, Strategies for a Successful Crowdfunding Campaign. Then take into consideration the following factors:
- geography: geographically speaking, what platform is the best platform to launch your crowdfunding campaign on?
- amount to raise: how much do you need to raise in order to get going versus how much do you think you can realistically raise from your network?
- strategy: how do you time your campaign with your move into the marketplace?
So that’s what we have to say in the first (of hopefully many) post(s) in the Strategy Session series. Let us know what you think!
We are on Twitter or you can contact us if you want to discuss this more. And stay tuned for more content, including next week’s Strategy Session, about Crowdinvesting + The Startup, and our new series that will feature amazing crowdfunding campaigns from around the world.
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