In 2011, the year of Kickstarter’s second birthday, the crowdfunding site recorded nearly 11,836 successfully funded projects (about 44% of all the projects submitted) with more than $99 million pledged.

The year showed phenomenal growth over the previous one when 3,910 successful projects were launched with $27 million pledged.

Kickstarter is already the world’s largest funding platform for creative projects. The majority of projects on Kickstarter are creative ones involving film, art, or music.

But product design and startups can be just as creative. Perry Chen, CEO, describes the funding model on Kickstarter as “somewhere between commerce and patronage.” And some of the most notable projects are technology products, including open social network Diaspora and the TikTok iPod Nano watch that raised almost $1 million.

One successful Kickstarter project is Startup Fever, a board game in which the players are company founders in Silicon Valley and manage money and employees (engineers, sales, executives) and allocate them to the right products. Investing in engineers creates better products, who attract more users, who in turn generate money. They achieved 380 backers who pledged $30 thousand, though only $10 thousand was sought. The game sells at $60 and will be available in February 2012.

The number of crowdfunding sites around the world grew by about 68% between 2010-2011. This is a finance vehicle that is not going away.

A free website where you can make a movie sounds like an oxymoron for an entrepreneur. Movies cost a fortune, right?

Wrong. Go to xtranormal.com and find out how you can type a movie. Do ask to see mine yet, but I’m working on it. If you plan what you want to say, you can do it in minutes, then upload it to your website, YouTube or send it to your contacts.

There is a more sophisticated version for business that you can use when you’ve mastered the free version. It’s still not expensive. Given the importance of getting your message over effectively and fast, this is an amazing tool that will help you. I always encourage clients to perfect their elevator pitch, so that anytime they’re asked what they do, they can answer in a trice.

Xtranormal is a way of doing this in video form. And it’s great fun to do.

The US House of Representatives has passed, by a walloping majority (407 t0 17), the Bill called HR 2930: Entrepreneur Access to Capital Act. It now needs to pass in the Senate, but is hardly likely to fail.

This new legislation is very important for the vast majority of entrepreneurs seeking to raise up to $5 million in equity funding, by means of crowdfunding. Crowdfunding is a way of raising relatively modest sums of money on the Internet from a large number of people, each offering small sums.

HR 2930 amends the Securities Act of 1933 to exempt from the prohibitions against use of interstate commerce and the mails for sale or delivery after sale of unregistered securities, including unregistered security-based swaps, any transactions involving the issuance of (crowdfunded) securities for which:

1. the aggregate annual amount raised through such issue is $5 million or less; and
2. individual investments in the securities are limited to an aggregate annual amount equal to the lesser of $10,000, and 10% of the investor’s annual income.

HR 2930 authorizes an issuer to rely upon certifications provided by investors. It amends the Securities Exchange Act of 1934 to exclude persons holding crowdfunded securities under this Act from application of “held of record” requirements with respect to mandatory registration of securities. It also amends the Securities Act of 1933 to exempt such crowdfunded securities from state regulation of securities offerings.

Role of equity finance

Many entrepreneurs seek to start a business, assuming that all they have to do is to write a business plan and angel investors and venture capitalists would come knocking at their door. They then express disappointment when that does not happen. A tiny percentage of startups attract any outside equity, other than from friends and family.

Raising loans is theoretically less of a problem, but banks these days will ask for more than simply a good credit rating and collateral. Equity has advantages, not least the fact that the funding is committed to your business and your intended projects. Investors only realise their investment if the business is doing well, eg through stock market flotation or a sale to new investors. Equity investors may bring more than just money, as well as potentially being open to more funding later.

Importance of crowd funded equity

Crowdfunding is growing in use around the world and there are businesses that are already raising loan and equity capital this way, albeit in small amounts. It is inspired by crowdsourcing, and involves the collective cooperation, attention and trust by people who network and pool their money together, usually via the Internet, in order to support efforts initiated by other people or organizations.

Zambikes International is a Californian company set up in 2010 that provides worldwide distribution for Zambian-made Bamboo bicycles, providing increase employment and impact into the lives of the Zambians who make them.

In Zambia, unemployment is over 50%, literacy is low, and school is not free. Finding a job supports more than the individual; it also supports their children, brothers, sisters, and the entire community. When you buy a bamboo bike, you are employing 40+ Zambikes workers that are a part of an entire community being developed in Lusaka West, Zambia.

The bikes seem to be hi-tech and high price, too, but here is one of the thousands of startups that are based on a hybrid model that does well by doing good.

Virginia Governor Bob McDonnell has signed legislation that will make Virginia the fourth state to allow stock corporations to become Benefit Corporations (B Corps). The bill had unanimously passed both the Virginia State Senate and the Viriginia State legislature. Governor McDonnell signed HB 2358 on March 26, 2011 and the legislation will take effect on July 1, 2011.

Previous states that have adopted B Corp legislation include Maryland, Vermont (where the legislation become applicable in July also) and New Jersey. Several other states are working on their own versions of benefit corporation legislation.

The Washington Post described benefit corporations in a very succinct way, “At its core, benefit corporations blend the altruism of nonprofits with the business sensibilities of for-profit companies. These hybrid entities pay taxes and can have shareholders, without the risk of being sued for not maximizing profits. Companies can consider the needs of customers, workers, the community or environment and be well within their legal right.”

The Startup Owl says, “It is not surprising that the benefit corp legislation is picking up speed. It is only codifying what is already the aspiration of many ventures. far to often the law is in catch-up, rather than enabling mode–especially where business is concerned.”

Peggy Farabaugh started Vermont Woods Studios, an online retailer of fine Vermont made furniture, a few years ago. You might think that an online business selling high value items was bound to fail. But what Peggy and her handful of colleagues have done is to prove that assumption wrong. Her business is thriving and individual online sales average over $2,000. She and her team have developed a model that is well worth you taking a look at. The lessons apply to many small online businesses–and perhaps to big ones, too!

Peggy is based in Vernon, Vermont and recently a team of my strategy students did a consulting job with her as part of their MBA program. One of their recommendations was to use online video to create a more intimate online experience. Peggy has now implemented their idea and you can see the results on different pages of the Vermont Woods Studios website.

One initiative is a video series she has called Bare Naked Business, where she shares the inside story of matters to do with running a small enterprise. I think they’re great. Go take a look at an example of Bare Naked Business–about an office move.

I have been a student of entrepreneurs for many years and watched many types of people creating ventures. I have created an Alphabet of Entrepreneurial Types that typified the many types of entrepreneurs I have witnessed. I have observed. There is no ‘one best way’ to be an entrepreneur and each type has an Achilles Heel that can trip them up.

A few examples:

• Edgewalker, who lives between two worlds and has a high tolerance for ambiguity, but may risk falling between two stools;
• Juggler, who can keep lots of balls in the air, but risks dropping important ones;
• Lone-Ranger, who can survive alone, but may be blind to his own mistakes.

Take a look at the Alphabet of Entrepreneurial Types.

I am delighted to see that revenue-based funding is becoming a growing competitor for equity and bank–not least because I was a beneficiary of such borrowing back in 1982.

The advantage to entrepreneurs is that the loan is based on your forecast revenues and repayments are in the form of royalties on them. So some people call them royalty-based loans.

Thanks to Thomas Thurston of Growth Science International for the illustration to the left.

The benefit for the enterprise is that you pay when you can afford to. If revenues are below forecast, then you are not penalized by digging into your cash when you can least afford it. The benefit for the lender is that if you do better than forecast, then you pay more.

So your repayments are variable and linked to revenue. You may not like paying more, but you only have to when you can afford it. Read more on Revenue-Based Funding and compare it with other new forms of funding such as Crowdsourcing.

During the Great Recession, more Americans have become entrepreneurs than at any time in the past 15 years. However, while the economy and its high unemployment rates may have pressed more individuals into business ownership, most of them are going it alone, rather than starting companies that employ others. So says the Kauffman Index of Entrepreneurial Activity, published March 7, 2011.

According to the study, 0.34 percent of American adults created a business per month in 2010, or 565,000 new businesses, a rate that remained consistent with 2009 and represents the highest level of entrepreneurship over the past decade and a half.

Carl Schramm, president and CEO of the Kauffman Foundation says, “Far too many founders are choosing jobless entrepreneurship, preferring to remain self-employed or to avoid assuming the economic responsibility of hiring employees. This trend, if it continues, could have both short- and long-term impacts on economic growth and job creation.”

Solopreneurs are no so solo as all that. They need suppliers, subcontractors and services, which of course they buy–from others, including other solopreneurs. If they are successful as solopreneurs, their venture will flourish and chances are high that they will hire later. This is parrticularly the case where a solopreneur is making something, rather than supplying services.

A service provider will reach capacity quite quickly. Once all their hours are booked, they can sell no more. But even they may resort to hiring others as independent contractors. Producer ventures are most frequently founded by creative people and once their products are designed then production can replicate them in volume, thus creating a need for more hands.