How to Raise Cash With Crowdfunding

Crowdfunding sites like Kickstarter and IndieGoGo attract hobbyists and wannabes, but they can also net real cash for those who use them strategically. With savvy profiles and targeted campaigns, some aspiring entrepreneurs are even raising amounts in the five or six figures. Here's how they do it.

Sam Miller was so sick of not being able to find jeans that fit that he decided to start a business to solve the problem. He and his partner, Leona Liu, spent nearly two years studying how they could create a company that would deliver custom-made, U.S.-manufactured jeans at a $60 price point. They sketched out a plan for Chicago-based Civali, sourced the technology they needed and then ran into a common entrepreneurial problem: no money. At the same time, they had no interest in having "investors breathing down our back," Miller says.

The two found the kick in the pants their business concept needed from the crowdfunding website Kickstarter. They launched their funding campaign in July 2011, eventually surpassing their original goal of $29,000 and raising more than $47,000 from 404 backers.

Aspiring entrepreneurs are increasingly jumping onboard with sites like Kickstarter clone, IndieGoGo, peerbackers and ChipIn. Now, as the concept becomes more well-known, users have become savvier about creating interesting profiles, targeting their audiences and promoting their offerings. Some are even managing to raise funds in the five and six figures.

The poster boy for successful crowdfunding is Scott Wilson, who worked on his LunaTik watch design as a pet project while running his Chicago-based design consultancy, Minimal. Wilson, a former creative director for Nike Watches, conceived a wristband that would hold an iPod Nano so the device could function as a watch. He'd heard buzz about Kickstarter, but his employees scoffed when he suggested a campaign for the LunaTik design in November 2010. Wilson had the last laugh, though. In 30 days, he far surpassed his goal of $15,000: He ended up raising nearly $1 million to develop his innovative design, the largest amount of money ever raised on Kickstarter.

"People get excited about it," says Kickstarter co-founder Yancey Strickler. "They're not just buying the thing--they want to help make it happen. They feel like they get a greater piece of it."

When those creative ideas solve a popular concern or problem, all the better. Houston-based LuminAid Lab raised more than five times its $10,000 goal to develop its solar-powered inflatable light during a 40-day campaign on IndieGoGo in November and December of 2011. U.K.-based eMakershop, meanwhile, raised nearly $160,000 on IndieGoGo for its 3-D printer concept.

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