On May 14, 2019, Kasie and Shennice welcomed Philippe Herndon of the Carolina Guitar Company into the studio to talk about distortion pedals and crowdfunding. Here are the show notes:
Kasie Whitener, Clemson Road Consulting, DMSB
Shennice Cleckley, Smart Cookie Coaching
Philippe Herndon, Caroline Guitar Company
Theme for the day:
Financial Boot Camp: Crowdfunding
- Financial Boot Camp Series
- Philippe Herndon and Caroline Guitar Company
- Crowdfunding 101
We’re asked A LOT for help with getting financing for businesses and let’s just be clear about something right away. No one is going to loan you money to pay yourself while you build your business. That’s not a thing.
So if you can’t pay your bills by selling something, then you can’t pay your bills and you need a job. A jobby-job. A J-O-B.
Okay, so that said, you may very well be the most expensive part of your company’s operating budget. We’ve all been in that stage of business where we’re making money just to pay ourselves. No shame in being there. But it’s awfully hard to grow from there. Hard to invest in equipment, locations, and other employees if your income needs to be stabilized first.
In the Financial Bootcamp series, we want to talk about being financially responsible. Learning what it means to build and grow a business that can persist.
We’re going to start today with Philippe and the idea of crowdfunding as a way to get people to support your business and maybe get you over the financial hump for stabilization and growth.
In two weeks, Stephanie Vokrel, financial advisor, will be here to talk about making long term investments that help your business generate income.
Two weeks after that, we’ll have Adam Lean of the CFO Project here to talk about getting financially literate and various services available to help you do that. So we’re doing these a little bit in reverse-order, but I think together the three will make a compelling class for our Start Something, Columbia! Learner-listeners.
Let’s get started by learning more about Philippe and the Caroline Guitar Company. Give us your 1 Million Cups 6-minute story. How did you become an entrepreneur? What’s the business? Who’s the target market? What problem are you solving?
Caroline Guitar Company grew up in the Incubator. Shout out to Caroline Crowder over there and the USC Incubator team. What advantages did that environment provide for the company? For you as a founder?
Let’s talk crowdfunding. It helped Caroline Guitar Company turn the corner. What were the conditions you were facing when you decided to do it? How much did you need? What mechanism did you use? What did you have to learn to be able to do it?
Crowdfunding is particularly advantageous for women because often female founders need small amounts and we are particularly community-focused and really, it’s your community that builds and supports your crowdfunding campaign.
I think the best indication that crowdfunding is a “thing” is that a consulting business has popped up to support it. We have their Crowdfunding cheat sheet with us, too. We can define some of the categories and help demystify what this fundraising strategy is all about.
Crowdfunding Better, a consultancy on this topic, has a great blog called, “You Deserve Funding” that says we have been trained by VCs to think only well-plotted, high-growth ideas deserve funding; and by banks ot think that only perfectly responsible FICO-score unicorns deserve funding. But crowdfunding kicks that in the balls and says you, as a person, are worthy of support.
They call the messy, uncertain work of entrepreneurship “Transformational” and say it’s okay to have a pivot, to not know what you’re doing, and to ask for support anyway. I dig that.
In this blog they gives these reasons small businesses should be crowdfunding:
- You already have a great story.
- The funding supply is not limited. (Scarcity of resources is not a thing.)
- Relationships are your bread and butter.
- Email lists are the best crowd-funding converters.
- Crowdfunding for $10,000 or less are the most successful. (So micro-loans.)
There’s also some confusing vocabulary around crowdfunding. Even the word “crowdfunding” bears definings. Let’s break down a few commonly-used terms:
- Peer-to-Peer Lending — facilitated by digital communities and is typically one borrower to one lender.
- Equity — lenders buy a stake in your company and the return on their investment is in your company’s future-growth.
- Funder — someone who provides financial support for the endeavor and may or may not receive rewards
- Investor — someone who expects financial rewards for the investment
- Seed funding — early stage contributions that help a company launch; often without reward to the funders
- Kickstarter, Patreon, Kabbage, IndieGoGo, Crowdfunding.com, CustomInk — all platforms for crowdfunding with different mechanisms, rules, and operations
How to do it: what are the elements of a successful campaign?
- Choose the right platform.
- Commit to a set amount and period of time.
- Cultivate your backers before you launch your campaign.
- Assign prizes and rewards for contributors.
- Participate in the crowdfunding world even if you’re not asking for funds.
At the Women’s Business Center Association conference back in the fall, I sat through a session with Kathleen Minogue a crowdfunding consultant. She teaches people how to select and use the various platforms, she’s got some “dos and don’ts.”
From their blog:
- Show up – The greatest crowdfunding myth is “If you build it, they will fund.” You have to show up as a person every day during a crowdfunding campaign. Digital tools make it easy to post a lot on social media, but trust is built in human time, through sincere personal interactions.
- Be authentic – You don’t need to be anything more than you are. In fact, if the YOU people know disappears from the campaign, it can be nearly fatal.
- Be consistent – We all know people who you only hear from when there’s something they need. That’s no different than showing up in a friend’s email for the first time in a year to ask them to contribute to your campaign. Keep your relationships alive through consistent communication. And this holds true for business email and social media communications. Consistency lets people know your brand is real and wants to provide them with something they need.
- Get others to back you up – Friends don’t let friends crowdfund alone – for a variety of reasons. Yes, crowdfunding with a larger team means a larger potential pool of backers, but more fundamentally, the trust of your immediate network of friends and family is what makes strangers feel more comfortable backing your campaign.
- Make a reasonable request – I’ll get heat here from people that say you should ask for the moon, but really, the best request – one that builds trust – is the one that is right for the recipient.
“The key in crowdfunding is to make it easy for someone to say “Yes.” Make sure you create rewards or investment levels that show your network you know who they are and what they like.”
Another blog by our Crowdfunding Better team suggests focusing on a single idea and working on that one thing for a full month. When other ideas come up, jot them down to return to later. But stay focused and you’ll see magic happen:
- You will feel proud of what you are accomplishing.
- You will communicate what you are doing in a consistent way.
- Others will begin to recognize the work you are doing.
- You will develop a supportive community around your idea.
- Ideas for financial support will emerge.
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