Whether you’re releasing a single album or starting an actual music related business, more than likely you will find yourself looking for funding or capital to get your business venture started. Some of the traditional means used to finance an endeavor have ranged from using personal credit cards to securing a bank loan to borrowing money from relatives.
In this post, we will take a look at a couple of alternative funding sources available to get your music project or business going.
Kickstarter targets those desiring to fund a creative project. Instead of investments or lending, the funding opportunity is donations based. This allows for 100% ownership and complete control over the projects by the creators. In return for their donations, donors receive perks or rewards such as products and experiences.
Kickstarter is rather open as to requirements and qualifications for obtaining financing. Funds can only be raised for creative projects and creators should offer rewards to their donors. The application process consists of a few quick questions. Kickstarter screens the applicants to make sure there are no violations of their guidelines (creative projects only and no financial incentives).
Kickstarter operates on an all or nothing funding model. This means that if the target funding amount is not met in a specific amount of time, Kickstarter cancels the funding campaign and no money changes hands. This protects the creators and the donors. Creators are not expected to complete a project with insufficient funds and donations are not given to projects that creators can’t complete.
The Kickstarter website provides a platform that allows potential donors to discover projects in need of funds. They also maintain a blog with information to assist creators and their projects.
ProFounder targets those who are business owners. The financing opportunity is an investment model based on raising money for the business from those in the community. This is not a loan from investors, and business owners transfer no equity (ownership) to the investors. They employ a revenue sharing model where a percentage of revenues are paid to the investors.
Requirements and qualifications to obtain financing include filling out an online application and paying a $100 fee once ready to start raising funds. Business owners can only contact and present the investment opportunity to those people with whom they already have substantial pre-existing relationship with. As with Kickstarter, if the funding target is not met, ProFouner does not transfer the funds for use.
The ProFounder website includes resources to help with preparing for an investment, creating a pitch, and creating the offer terms. A support forum and blog are both available to offer assistance.
Advantages and Disadvantages
The advantage to using the two before mentioned alternative financing services, known as crowdfunding, is that they allow a music creator or business owner to raise needed funds while remaining in control and keeping ownership of their project or business. The disadvantage to using those services is that if the person seeking funds does not have enough connections or is not able to connect with enough potential donors, funding is not possible.