10/30/2012 01:00 pm ET Updated Dec 30, 2012

6 Steps to Have a Successful Crowdfunding Campaign

Back in the day, you funded a startup business by tapping a bank account. Hitting up friends or family was the logical next step. With luck, an SBDC might have floated you a microloan. If not, you'd consider pitching an angel investor or venture capital firm. Now, capitalizing on the span of social networks, a new way to fund a small business has emerged. Since the term was first used around 2006, close to 500 active crowdfunding websites are available to help you inject fuel into your small business. With so many options, three have risen to the top as the most popular:, and For this service, at least 5 percent of what is raised goes to these sites as commission fee.

Here are tips on how you can really ramp up your small business reserves with crowdfunding.

When you sign up for a crowdfunding site, first you must decide on a goal and a time frame. You can choose up to 60 days to achieve your funding goal. But here's the deal, choose your financial goal carefully and conservatively, because if your goal is $5,000 and you get $4,999.00 in pledges and donations -- YOU GET NOTHING. All the pledges are returned and your campaign is considered unsuccessful.

Fans of crowdfunding say the resource model unlocks the ability for people who could not raise capital in the last five years to launch their dream. While high-tech projects like Pebble's E Paper Watch, who raised $10 million on Kickstarter earlier this year and have yet to deliver one watch, come to mind when discussing crowdfunding, most of the campaigns raise less than $10,000.

Woody Neiss, Partner at Crowdfund Capital Advisors says "Mainstreet USA will benefit most from crowdfunding. All the smart people do not live in Silicon Valley. Crowdfunding gives anyone the opportunity to generate capital to launch their smart idea. They can tap into their social networks to get capital to fund their businesses."

If you want to develop a crowdfunding campaign to launch your business idea -- first research which sites are right for your type of business. is really only interested in creative projects such as film, music, art, fashion and publishing, etc. Their 13 submission categories and guidelines are spelled out on their website.

Once you decide on the right crowdfunding partner, follow these six steps to have a successful crowdfunding campaign.

Work Your Network First. Be active on social media at least six months before the launch of your campaign. If you can't get people who you know to invest in your idea, no one else will. Your first pledges will come from your personal network.

Invest in a Great Video. Video is a compelling selling tool. Be clear about what you are doing. Your content should be two minutes or less. Remember, you are selling yourself as much as your product or service.

Tell A Good Story. If you have a strong idea, tell a compelling story about it. Clarify your business goals and highlight your team if you have one.

Do Not Exaggerate. Be enthusiastic about your business idea but make sure you do not hype your project. If you promise things you cannot deliver, it will turn into a PR and potentially legal nightmare.

Have Great Rewards. People do want something for their donation, so be creative about what you could give them. Access to the creators of the project at a special event is a good example of a reward.

Donor Relations is Critical. Be sure you stay in touch with your network of donors. Keeping them engaged and interested in your business will make them feel they are part of the effort and it'll be easier to go back to the well if you ever need raise more funds.

Can you share a crowdfunding experience?

This was originally published under the title: How to Leverage Crowdfunding For Your Small Business at

Melinda F. Emerson, known to many as SmallBizLady is one of America's leading small business experts. As CEO of Quintessence Multimedia, Melinda educates entrepreneurs and Fortune 500 companies on subjects including small business start-up, business development and social media marketing. Forbes Magazine named her #1 woman for entrepreneurs to follow on Twitter. She writes a weekly column for the New York Times, and hosts #SmallBizChat Wednesdays on Twitter 8-9pm ET for today's entrepreneurs. She also publishes a resource blog Melinda is also bestseller author of Become Your Own Boss in 12 months; A Month-by-Month Guide to a Business That Works.