Of all the new legislation enacted in 2013, none may have more far-reaching implications for entrepreneurs than the JOBS (Jumpstart Our Business Startups) Act. Signed by President Obama in April 2012, this law offers a much broader playing field for small businesses by enabling entrepreneurs to leverage the power of crowdfunding platforms.
In our initial posting, 'Connecting the Dots'_The Crowd-funding Revolution, we shared the first part of our conversation with Kevin Lawton, the co-author of this new book. If you haven't already read it, I urge you to visit the posting. He has some very interesting things to say about localization vs. globalization strategies.
In this posting Lawton stresses the importance of creating a powerful mindset from the get-go.
VCIE: Once entrepreneurs receive enough critical mass (investors) to launch their projects, are there any later moments when their projects become especially vulnerable to failure?
Lawton: As a serial entrepreneur, I have to say most failure in businesses is baked in from the beginning. Certainly there is all the pivoting and proper market responses which are needed. But truly, I've seen failure come from people's mindset, right from day number one. And of course, from being surrounded by the wrong team.
Whether money is obtained from a private or public crowd, much is the same. Some people blog about the irrational exuberance of the entrepreneur, or over-promising that occurs in crowdfunding. Man, they obviously have not been in many pitches to VCs!
In any case, tough situations happen often and when you can tolerate them the least. Team members get "cold feet" and bail out. Costs turn out higher than expected. Etc. Most of these kinds of issues could have been sorted out in the beginning. So to me, the most vulnerable moment is in the beginning, before the 1st investor arrives. Be honest with yourself. Don't take money to "start a company", take money because you've already started. Success is a mind-set.
VCIE: Which type of projects are the best fit for crowdfunding efforts?
Lawton: If an entrepreneur is willing to expose their idea, and there is enough interest from the investment community to fund it, it's a fit for crowdfunding. We're seeing a revolution in inexpensive equipment (e.g. 3D printers, DIY gene sequencing) which is opening the doors to launching companies on the cheap using crowdfunding, in product spaces which used to be too capital-intensive to seed fund. Additionally, exiting companies can use crowdfunding on a per-product or even per-feature basis. What that does is garners a loyal user base and provides a market-driven feed-back loop for your existing business.
Why "poke and hope" with new products, when you can ask the market?
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The Crowdfunding Revolution
Authors: Kevin Lawton and Dan Marom
Publisher: McGrawHill, ISBN: 978-0-07-179045-1
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