On Crowdfunding Sites, Age Doesn't Matter

For many young, first-time entrepreneurs, tapping parents for startup capital is the closest they'll come to landing investors. But what do you do if the bank of mom and dad can't or won't subsidize your brilliant business idea? Consider crowdfunding.

Websites like Kickstarter, IndieGoGo, and PeerBackers follow a crowd sourcing business model, wherein members sign on as backers and supply the capital necessary to start a business or product. In return, these investors typically receive tangible rewards like special access to a screening, a T-shirt or a sample of the proposed product.

Last year, when Sam Gordon, 27, and his business partners used Kickstarter clone script to raise cash for their Menlo Park, Calif.-based startup -- a smartphone stand maker called the Oona -- he offered to hand over early prototypes of the device to investors who gave a minimum of $25. The move served two goals, says Gordon: the Oona raised more than $130,000 through the site and they got a treasure trove of beta testers (just under 4,000) to try out the device. “We had the idea for our product, but we didn't have enough money to go and start making it and selling it,” Gordon says. “We also wanted to see if people would like it.”

Though Gordon found success, plenty of aspiring entrepreneurs aren't so lucky. In 2011, 46 percent of projects listed on crowdfunding sites failed to reach their stated goals, according to data from Massolution, the research and advisory arm of Crowdsourcing.org, which tracks the category.

The good news? Age tends not to be an issue among crowdfunding investors. "Young people have proven they are able to raise money like anyone else," says IndieGoGo's CEO and co-founder, Slava Rubin. "The key for anyone is to have a good pitch, be proactive and find an audience that cares."

Read more: http://www.entrepreneur.com/article/223055