Learning Objectives

12-1: Define bootstrapping and illustrate how it applies to entrepreneurs.

Entrepreneurs use their own sweat equity in combination with other bootstrapping strategies to make enough progress to get in a better position to attract more formal types of funding.

12-2: Identify common bootstrapping strategies used by entrepreneurs.

The list of common bootstrapping techniques is extensive. It includes ideas like using the home as the office, renting or leasing before buying, minimizing personal salary initially, developing and reaching out to contacts, offering equity reimbursement, and maintaining low operating inventories.

12-3: Explain the difference between crowdsourcing and crowdfunding.

Crowdfunding involves raising funds from a large audience, typically through the Internet. Crowdsourcing involves using the Internet to attract and manage free labor generated by enthusiasm for the product or service.

12-4: Describe the effects of crowdfunding on entrepreneurship.

The crowdfunding movement has provided a democratic means of funding that has never before existed on the scale it exists today. Equity crowdfunding has emerged as a popular crowdfunding alternative, where ownership stakes (stock) are issued in exchange for funding.

12-5: Define the four contexts for crowdfunding.

Crowdfunding largely falls into one of four types: patronage model, lending model, reward-based model, and investor model.

12-6: Explain the advantages of crowdfunding for global entrepreneurs.

Crowdfunding is not just a means to generate necessary cash, but also a good direct line of contact with end users. Many crowdfunding options exist, and entrepreneurs are free to use whichever method they chose.

12-7: Describe 10 ways in which entrepreneurs can conduct a successful crowdfunding campaign.

Crowdfunding is flexible and exciting but not without its challenges; it’s not free money. Entrepreneurs still need to make sure their product/service addresses a real business need, a benefit to customers that is being under-addressed or unaddressed. Successful campaigns start as early as is feasible, maintain commitments, and do not overpromise.