What is Machine Learning? A definition

Machine learning is an application of artificial intelligence (AI) that provides systems the ability to automatically learn and improve from experience without being explicitly programmed. Machine learning focuses on the development of computer programs that can access data and use it learn for themselves.

The process of learning begins with observations or data, such as examples, direct experience, or instruction, in order to look for patterns in data and make better decisions in the future based on the examples that we provide. The primary aim is to allow the computers learn automatically without human intervention or assistance and adjust actions accordingly.

Some machine learning methods

  1. Machine learning algorithms are often categorized as supervised or unsupervised.
  2. Supervised machine learning algorithms can apply what has been learned in the past to new data using labeled examples to predict future events. Starting from the analysis of a known training dataset, the learning algorithm produces an inferred function to make predictions about the output values. The system is able to provide targets for any new input after sufficient training. The learning algorithm can also compare its output with the correct, intended output and find errors in order to modify the model accordingly.
  3. In contrast, unsupervised machine learning algorithms are used when the information used to train is neither classified nor labeled. Unsupervised learning studies how systems can infer a function to describe a hidden structure from unlabeled data. The system doesn’t figure out the right output, but it explores the data and can draw inferences from datasets to describe hidden structures from unlabeled data.
  4. Semi-supervised machine learning algorithms fall somewhere in between supervised and unsupervised learning, since they use both labeled and unlabeled data for training – typically a small amount of labeled data and a large amount of unlabeled data. The systems that use this method are able to considerably improve learning accuracy. Usually, semi-supervised learning is chosen when the acquired labeled data requires skilled and relevant resources in order to train it / learn from it. Otherwise, acquiringunlabeled data generally doesn’t require additional resources.
  5. Reinforcement machine learning algorithms is a learning method that interacts with its environment by producing actions and discovers errors or rewards. Trial and error search and delayed reward are the most relevant characteristics of reinforcement learning. This method allows machines and software agents to automatically determine the ideal behavior within a specific context in order to maximize its performance. Simple reward feedback is required for the agent to learn which action is best; this is known as the reinforcement signal.
  6. Machine learning enables analysis of massive quantities of data. While it generally delivers faster, more accurate results in order to identify profitable opportunities or dangerous risks, it may also require additional time and resources to train it properly. Combining machine learning with AI and cognitive technologies can make it even more effective in processing large volumes of information.

Protect Your Startup From A Cybersecurity Attack

You’ve probably poured everything you have mentally and financially into your startup. There’s an area you’re likely overlooking, however, and that’s cybersecurity.

Anytime you’re using technology, you are at risk of being the target of a cyberattack, and the way these attacks occur is always evolving.

For example, one of the big threats right now are the different types of DNS attacks, and as is the case with so many other types of cyberattacks, it doesn’t matter how small you are. You could be a business of one and still be the victim of a cyberattack.

A study from the Ponemon Institute found that 55% of SMEs experienced some form of cyberattack leading up to the collection of the data for the study. If you use the internet, have a website or have cloud accounts, you’re at risk and SMEs may be more at risk because they don’t always have the resources or knowledge to deal with threats.

As a startup, you probably don’t have the budget for a dedicated IT team, but the following are steps you can take regardless.

Educate Yourself

If you’re at the helm of your startup, whether you have employees under you or not, you set the tone, and you are the leader. You’re also the person who can make or break your cybersecurity policies and implementation.

Even if you don’t have the budget to bring a security professional on with your company, learn as much as you can.

Get a feel for what the current threat landscape looks like and what you can do to protect your business.

Some things are simple—for example, making sure you understand phishing scams and how to be safe when you open your email.

Another thing you can learn about it and implement with no money at all and very little time is the use of strong passwords. If you’re using the same password across multiple accounts, you’re more likely to be a target.

Use a password manager on all of your devices so that you can mix them up but don’t have to worry about remembering them. With a password manager, all your stored passwords are encrypted.

Another simple step to put in place?

Enable two-factor authentication on all of your accounts.

When you’re storing backups, don’t do so on your own network. Store them somewhere that’s not connected to your company network, such as the cloud. Then, if your data and network are compromised, you’ll have copies of everything elsewhere.

Train Employees

If you do have employees, even if just one, train them on cybersecurity best practices as well. An estimated 90% of company breaches stem from phishing attempts, and in these cases, a cyber attacker will pose as a trusted person, such as a bank representative. Then, you or your employee would theoretically give the attacker sensitive information.

One of the most important things you can do for your business in terms of cybersecurity, no matter what your size is, is to learn how to recognize phishing attempts.

Have the Fundamentals In Place

As your budget grows, so might your cybersecurity protections, but in the meantime, beyond educating yourself and training your employees, you need to have at a bare minimum the basics of cybersecurity in place.

First, conduct a cybersecurity audit. This is important because it will show you where you are versus where you need to be. It will also give you a baseline so you can measure the success of future strategies you implement.

Beyond that, have a firewall. Anytime you have security software, make sure that you update it as you’re supposed to, and patch devices and firmware.

A good option for some startups, even with a small budget, is to consider managed IT services.

As a business owner at the helm of a startup, you might not have the time to put into cybersecurity. Managed IT is often an affordable way to get features like constant network monitoring, IT support, and device updates.

What’s especially good about managed IT for a startup is that there’s an inherent sense of scalability available from most providers so you can grow as you need.

You’re busy when you’re running a startup, and your time and attention are being pulled in countless directions, but that doesn’t mean you can overlook cybersecurity. Cybersecurity can be make or break for a startup, and there are things you can do today to make your business more secure from threats.

Selecting The Right Domain Name For Your Business

Take a moment to think about your favorite brand. How long does it take you to find their company website? Is theirs the first name that comes up in a Google search? If it’s a well-known brand, they probably have an easy-to-find website with a memorable domain name.

Picking a domain name for your business – in essence, your digital home – is a lot like buying a physical home. You need to find the perfect fit and it has to be available.

While you might think you have the perfect name already picked out, chances are you’re going to have to get creative. There are already nearly 360 million registered domain names.

Why is a domain name so important? Simply put, it is the heart of your online identity. And while domain names can be changed at any time, doing so could have a negative impact on your brand and your SEO. Choose the best possible name from the start and stick with it.

To help you understand the ins and outs of purchasing and maintaining a domain name, we’ve put together a list of six tips to help you make an informed decision.

Choosing the best domain name.

Choosing a unique domain name is an important part of your online marketing strategy. Domain names should be unique and easy to remember so your customers and prospects can easily find you online.

Your domain name should reflect your core products or services. As many of the obvious names are already taken, it’s important to make sure your name stands out.

When choosing a domain:

  • Keep it simple – Customers expect speed and convenience, especially when they’re searching for a product or service. Keep your domain name short and easy to type, remember and refer others to.
  • Use common keywords in your domain name – Always consider SEO. Use your business’s main keyword phrase(s) in your domain name to help your site’s ranking on search engine results pages (or SERPs).
  • Make it relevant to your business – Your domain name must be relevant to your products or services. At the same time, avoid locking yourself into a box if you’re considering expanding your offerings.
  • It doesn’t have to be a “.com” – The most commonly used and recognized domain extension is .com. However, search engines treat other domain extensions, such as .net, .site or even .club, the same as .com. Create an exact match domain (a domain that includes the exact keywords you want to rank for) and the search engines are likely to rank it higher than a domain name that’s less descriptive.

Trademarking your domain name.

If your domain is the same as your brand name, trademark it to protect your business. Trademarks provide legal recourse if a person or business infringes on your brand.

Changing your domain name.

If your business is going through a rebranding or if you want to capitalize on SEO opportunities, domain name changes can be beneficial. You can change your domain name whenever you like, and most registrars offer a process to migrate from one domain name to another.

Renewing your domain.

Don’t forget to renew your domain. Domain names are rented rather than purchased. The more domain names a registrar has under its management, the greater the operating costs. ICANN, the international governing body of domain names, wants to ensure that businesses can accommodate for this inflation over time.

Most registrars offer automatic annual renewal for domains. Automated renewal ensures you don’t lose your preferred domain name and won’t have to worry about remembering to renew it every year.

Redirecting traffic to social media.

A redirect automatically takes a user from one URL to another. 301 redirects are typically used to make sure users end up in the right place. This redirect tactic may be used by a business that has purchased a domain name but doesn’t have a website set up. In this case, they could redirect their domain to a social media page.

While this strategy is a good solution for companies who don’t yet have a website to go with their domain, redirecting to social media isn’t a long-term solution. Having your own website enhances your brand’s credibility and allows for greater control over your content. Setting one up should be a priority.

Private registration.

The information listed on your domain name must be made publicly available per your registrar’s agreement with ICANN. Using false information violates the registration agreement and can lead to the termination of your domain registration.

Ensure your personal information remains private by purchasing private registration, which provides all the benefits of domain registration without exposing your personal information. When you purchase private domain registration services, the WHOIS directory will list your registrar’s name, postal address and phone number instead of yours, while still providing the full benefits of registration (though this can vary by registrar). This means you retain the ability to:

  • Cancel, sell or transfer your domain registration.
  • Turn off the privacy feature, so your registrant details are shown instead.
  • Renew your domain registration upon expiration.
  • Designate the name servers to which your domain points.
  • Resolve claims arising out of a dispute involving your domain registration.

Choose a domain name with confidence.

Now that you’re familiar with the finer details of choosing and maintaining a domain name, you’re ready to take action. Your website is the face of your business online, so use this knowledge to choose the best available domain name. Get started now with our helpful resources.

 

Tips for Young Entrepreneurs

An entrepreneur is someone who attempts to dream with a strong vision and finds ways to actualize it through innovative ideas and hard work. As Walt Disney said, “All our dreams can come true, if we have the courage to pursue them.” Beginning with courage followed by hard work, strategic planning and ways to execute them systematically is the foundation for business success. Striving hard and not surrendering to failures but instead learning from them should be the motto that every entrepreneur should follow. A successful entrepreneur not only satisfies his creative ideas but also contributes to the society at large.

If you are young entrepreneur venturing into a new business and are looking at what you should know before putting yourself out there, here are five things you ought to keep in mind

Know your market and your product

If you are truly passionate about an idea, the first step is to spend time on market research. Understand your target audience, their needs and challenges. Interact with potential customers to know more about how your idea can help solve a problem. Take the time to understand if your product will stand out in a crowded market. If there are too many competitors, find your niche. Work towards creating a product or solving a problem that’s unique.

Find a mentor

When you are starting out young, it’s easy to get carried away with your idea and lose focus from the larger picture. Find a mentor who can guide you with business strategies, crunch numbers, connect you to the right group of people and provide insights about the market. An experienced mentor can play a key role in the success of your business.

Networking

Networking is a must if you want more people to know about your company or generate business leads. Identify networking events that are specific to your industry and make it a point to attend these events regularly. Participating in these events will help you build connections, identify new trends in your industry, helps you hire the right talent and build visibility for your business.

Transparency

Maintain transparency across all the stakeholders involved in the business especially customers. Don’t fool your customers just to satisfy sales. Be transparent about what your product is good for and what it is not good for. It’s not easy to maintain transparency across all aspects but once you start practicing it, positive results are bound to follow. Additionally, it also helps to build great brand image.

Perseverance

Perseverance is an important trait for an entrepreneur. Never give up on the idea that you are passionate about. When you start out young, you have the advantage of time. If the Plan A does not work, be ready with a contingency plan. The concept of overnight success rarely works in business. There might be multiple rough moments in your entrepreneurial journey, dust it off and keep working towards your goal.

 Marketing

While running the day to day operations, it’s easy to ignore the other aspects such as marketing and branding. A great idea is just an idea if no one knows about it. People are only familiar with a brand if they’re made familiar with it. Marketing is an important and an essential tool for reaching out to the desired market. It’s important to effectively explain why people must buy your product or invest in your idea.

Empowering Women Entrepreneurship in India

The modern era is the era of empowerment and upsurges in the condition of women. Be it the political landscape or the corporate scenarios; women have stepped outside the boundaries of homes and kitchens. They have confidently taken up the roles of leaders and bosses and are rubbing shoulders with the best of corporate leaders in the industry.

In a male-dominated business environment, finding women entrepreneurs with successful enterprises is a real challenge. India has produced some great female entrepreneurs in the form of Indira Nooyi-Chairperson PepsiCo, Upasana Taku-Founder Mobikwik, Neeru Sharma-Infibeam, Kiran Mazumdar Shaw-Founder of Biocon, Vandana Luthra-Founder of VLCC and Shahnaz Hussain –CEO of Shehnaz Herbals. They are great role models for aspiring women entrepreneurs in India.

Women Entrepreneurship in India: an Overview

Estimated total businesses in India 58.5 million
Estimated total women-led businesses in India 8.05 million
Percentage of Female Entrepreneurs in India 14%
Distribution of Women Enterprises in India 33% in Agriculture, 67% in Manufacturing& Retail
Average Employment in Women-owned Enterprise 1.67
% of firms with female partnerships 24%
Employment provided by Women Enterprises 13.5 million Indians
Schemes for Women empowerment provided by current Indian Government/banks Annapurna Scheme

Stree Shakti Package

Mudra Yojna

Mahila Udyam Nidhi

Problems Faced By Women Entrepreneurs in India

Women entrepreneurs in India have their own set of pitfalls and challenges. Only about 14% of businesses in India are run by women, with 57% of these being started by women alone. In a patriarchal society, women face severe restrictions to break the barriers of gender disparity, lack of resources, and inappropriate networking.

Let us explore some significant problems faced by women entrepreneurs in India:

  • Business Loan for Women Entrepreneurs
  • Lack of necessary business inputs like raw material, manpower
  • No or limited family support
  • Limited education and research opportunities
  • Inadequate infrastructure
  • Social limitations.

Reasons for restraint are numerous and call for the empowerment of women to break free first from their low achievement mind-set. An educated, skilled, and ambitious Indian woman will be powered to train her mind in the right direction to achieve her business targets. A little support and motivation in the right direction can work wonders for her and propel her on the right path.

Empowering Women Entrepreneurship in India

  • Providing Capital Access 

The essential element of an enterprise is finance. Women in India generally face financial restrictions as there is no property in their names that can be signed off as collateral for financial loans. An excellent start to an enterprise with a solid financial base can pave the way for steady business. Capital access in the form of fixed and current assets as well as working capital loans or small business loans for women entrepreneurs can make a big difference. With cooperation from the government now, credit lines and business loans for women are made available.

Under the Start-up India Scheme initiative by the Government of India, several programs provide free co-working space for women-led entrepreneurs, with over 50 seats available.

  • Sustainable Women-only Collective Enterprises

Women across all levels of society are capable of being drawn into the economic wave. It should be noted that women entrepreneurs do not belong to the urban population alone. Proper guidance and business initiative to rural women can also make leaders emerge. Women entrepreneurs can come up with sustainable enterprises that deal with livelihood activities like dairy farming, basket making, tailoring, organic farming, etc.

Initiatives for educating such participants in the business know-how should be taken in the form of lectures and workshops.

  • Social Network Build-Up

Women, by default, have a knack of conversations and building up a relation. This skill should be harnessed, and women entrepreneurs should be taught the significance and skill of building up a network with various levels of authority like customers, clients, suppliers, buyers, local government agencies, etc.

Building up a support system cannot be done alone, and women should be encouraged to overcome the fear of rejection and doubt. They should stretch their horizons across multiple channels for visibility.

  • Availability of Role Models and Mentors

Women entrepreneurs who are just beginning their business venture are always in need of appropriate mentors. They can look up to them in times when the business flow is low, and the start-ups face teething problems.  The availability of coaches and mentors who have carved a niche for themselves in the corporate world can provide encouraging relief to them. In the initial stages of a start-up, when uncertainties loom up and doubt clouds the mind of young female entrepreneurs, proper mentorship campaigns can work wonders. Peer networks, industry connect, and investor meets through proper mentorship can help build a robust support system.

  • Business Education

Education is the forerunner for any skill. Educating the women entrepreneur class in business ethics, policies, procedures, and other corporate skills become essential to make the new women entrepreneurs aware of the corporate environment. Knowledge about current market strategies, funding alternatives, supplier chains, marketing, and advertising is necessary for the correct visibility of the product or the service that they are trying to sell.

  • Appropriate Prioritization of Tasks 

Women have the double responsibility of taking care of both work and home. Prioritization of tasks becomes mandatory for them if they want to climb up the corporate ladder. Mentorship workshops and campaigns can be conducted to make new women entrepreneurs from all sections of society. There are hundreds of decisions to be taken daily in the business environment, and only correct prioritization of the tasks can help in proper scheduling and execution.

With the advancement in education and mind-set of the Indian population, women entrepreneurship in India looks up to a bright future. Opportunities are available more than before. Women will have to take initiatives, empower themselves, and make use of resources available to break the glass ceiling and set up their business ventures. Women empowerment in the right direction will not only positively impact the lives of these women, but their families and the society at large as well.

Risks That Every Entrepreneur Must Take

Risk-taking is almost synonymous with entrepreneurship. To start and support your own business, you’ll have to put your career, personal finances and even your mental health at stake.

For most, the prospect of making your own decisions and being in charge of your own destiny is worth it. But if you’re going to be successful as an entrepreneur, you have to be prepared for the risks and challenges that come with it.

The following are seven risks that every entrepreneur must take, from ideation to ongoing development:

1. Abandoning the steady paycheck.

Before you venture into the world of business ownership, you’ll first have to say goodbye to your current job, and in some cases, your career. Some people have the luxury of a backup plan — an option to resume your career in case things don’t go well in your independent business.

But for most starting entrepreneurs, the choice is a risky plunge. There’s no guarantee of your personal income, especially in the first few months and years of your company’s existence, and you’ll probably be too busy to secure or sustain an alternative line of income.

2. Sacrificing personal capital.

Some entrepreneurs are able to start their ventures relying solely on external funding. That usually means a collection of angel investor contributions, government grants and loans, and results from crowdfunding campaigns. But many entrepreneurs also have to dive into their own bank accounts and personal savings to get things started.

You may not need to completely liquidate your nest egg, but you will have to front at least some personal money — and that means abandoning, or at least diminishing, your safety net.

3. Relying on cash flow.

Even if you have a line of credit, securing a regular cash flow is difficult and stressful. You can position yourself for a profitable year, but still struggle with the day-to-day necessities if your revenue doesn’t match or exceed your costs in a timely manner.

Bills can add up quickly, and if you don’t have enough revenue to support your outgoing cash flow, you could run short of money for paychecks or be forced to dip into emergency funds. Be prepared to address it daily, or at least weekly.

4. Estimating popular interest.

No matter how much research you do or how many tests you complete, you’ll never be able to estimate popular interest in your business with perfect accuracy. People are somewhat unpredictable, which could put a giant hole in your otherwise sound plans.

Even when all the data appears to be in your favor, there’s a chance you’re overestimating the interest in your company, and if your projections are off, your entire financial model could implode.

5. Trusting a key employee.

When you first start a business, you won’t have a full team of employees working for you. Instead, you’ll probably have a small, tight-knit group of people working tirelessly together in an effort to get things up and running. You’ll have to put an overwhelming amount of trust in them, especially if they have special skills that are hard to find and are willing to start work at a lower salary than the industry standard.

For example, if you hire a single, experienced lead developer to work on your product over the course of a few months, you’ll need to have absolute trust in their ability to get the job done on time. Otherwise, your timeline (and your product) could be fatally compromised.

6. Betting on a crucial deadline. 

Startups are, by nature, forced into strict timelines for their product launches and milestone goals. Their finances are fragile, and their investors are eager to start seeing the wheels turning. As a result, most entrepreneurs are forced to make multiple goals contingent on a handful of deadlines, and those deadlines become absolutely critical.

Be prepared to stay up at night worrying about your ability to hit those deadlines, and coming up with contingencies if you cannot.

7. Donating personal time (and health).

Entrepreneurship takes a toll on the average person. You’ll spend countless hours doing work to make your company successful, and your remaining hours worrying about what you have or have not done thus far. You will lose sleep, you will miss out on personal time, and you will experience much more stress than usual.

The rewards of entrepreneurship often outweigh these personal risks, but you have to be prepared to live this type of lifestyle.

Risks shouldn’t steer you away from pursuing entrepreneurship. Instead, see them for what they are: necessary obstacles on a greater path. There’s no way to avoid the risks you’ll face as an entrepreneur, but by recognizing them, you can prepare for and mitigate them.

 

 

Risk Involved in Entrepreneurship

Most entrepreneurs are risk-takers by nature. Many entrepreneurs risk all that they have when they decide to launch a business. For entrepreneurs, there is no secure monthly income, and spending time with family can be a challenge. Here are some of the risks that every entrepreneur and investor should evaluate and minimize before starting a business.

Financial Risk

An entrepreneur will need funds to launch a business either in the form of loans from investors, their own savings, or funds from family. The founder will have to put their own “skin in the game.” Any new business should have a financial plan within the overall business plan showing income projections, how much cash will be required to break-even, and the expected return for investors in the first five-year timeframe. Failure to accurately plan could mean that the entrepreneur risks bankruptcy, and investors get nothing.

Entrepreneurs face many risks when they launch a venture, and they should take measures to insure against those that are most likely to affect them.

Strategic Risk

An impressive business plan will appeal to investors. However, we live in a dynamic and fast-paced world where strategies can become outdated quickly. Changes in the market or the business environment can mean that a chosen strategy is the wrong one, and a company might struggle to reach its benchmarks and key performance indicators (KPIs).

Technology Risk

New technologies are constantly emerging, particularly in the era of the Fourth Industrial Revolution. Some of these changes are characterized as “paradigm shifts” or “disruptive” technologies. To be competitive, a new company may have to invest heavily in new systems and processes, which could drastically affect the bottom line.

KEY TAKEAWAYS

  • Entrepreneurs face multiple risks such as bankruptcy, financial risk, competitive risks, environmental risks, reputational risks, and political and economic risks.
  • Entrepreneurs must plan wisely in terms of budgeting and show investors that they are considering risks by creating a realistic business plan.
  • Entrepreneurs should also consider technology changes as a risk factor.
  • Market demand is unpredictable as consumer trends can change rapidly, creating problems for entrepreneurs.

Market Risk

Many factors can affect the market for a product or service. The ups and downs of the economy and new market trends pose a risk to new businesses, and a certain product might be popular one year but not the next. For example, if the economy slumps, people are less inclined to buy luxury products or nonessentials. If a competitor launches a similar product at a lower price, the competitor might steal market share. Entrepreneurs should perform a market analysis that assesses market factors, the demand for a product or service, and customer behavior.

Competitive Risk

An entrepreneur should always be aware of its competitors. If there are no competitors at all, this could indicate that there is no demand for a product. If there are a few larger competitors, the market might be saturated, or, the company might struggle to compete. Additionally, entrepreneurs with new ideas and innovations should protect intellectual property by seeking patents to protect themselves from competitors.

Reputational Risk

A business’s reputation is everything, and this can be particularly so when a new business is launched and customers have preconceived expectations. If a new company disappoints consumers in the initial stages, it may never gain traction. Social media plays a huge role in business reputation and word-of-mouth marketing. One tweet or negative posting from a disgruntled customer can mean huge losses in revenue. Reputational risk can be managed with a strategy that communicates product information and builds relationships with consumers and other stakeholders.

Environmental, Political, and Economic Risk

Some things cannot be controlled by a good business plan or the right insurance. Earthquakes, tornadoes, hurricanes, wars, and recessions are all risks that companies and new entrepreneurs may face. There may be a strong market for a product in an under-developed country, but these countries can be unstable and unsafe, or logistics, tax rates, or tariffs might make trade difficult depending on the political climate at any point in time. Also, some business sectors have historically high failure rates, and entrepreneurs in these sectors may find it difficult to find investors. These sectors include food service, retail, and consulting.

Bottom Line

The U.S. Bureau of Labor Statistics found that of the small businesses that were started in 2014, 80% made it to their second year (2015), 70% made it to the third year (2016), 62% made it to the fourth year (2017), and 56% made it to the fifth year (2018). Entrepreneurs should expect to make some mistakes, some of which will be costly. However, with the right planning, funding, and flexibility, businesses have a better chance of succeeding.

 

 

Know More About Crowdfunding

Crowdfunding is a form of financing a project or business venture by raising small amounts of money from a collective of individuals. There are over 600 different crowdfunding platforms in the world that make it easy for entrepreneurs, investors, and people to connect. Anyone with an idea has the chance to pitch it to available investors. It’s a young, yet popular form of both crowdsourcing and alternative financing.

It’s growing exponentially—so much so that the crowdfunding industry is predicted to grow to $300 billion by year 2030. Crowdfunding is completely transforming the way companies raise capital, how consumers behave with their money, and the market as a whole.

How to Use Crowdfunding for Your Business or Startup

The crowdfunding definition may be simple, but using this financing option isn’t always as easy. Crowdfunding is not as simple as posting your project and reaching your goal of $10,000 the next day. It takes strategy, a lot of preparation, and a clear understanding of which crowdfunding type and platform is right for you. Here are some initial steps and general guidelines on how to set up your crowdfunding campaign.

  • Choose the right platform for your business. Each crowdfunding platform is unique to a specific type of crowdfunding, niche, or industry. This helps determine which potential customers you will attract.
  • Make your idea enticing. Define who your audience is and what they need, and cater your messaging toward them. Keep it simple and digestible, but add compelling visuals or videos to intrigue people and tell your business’s story.
  • Offer rewards for people. Provide value for backers to support your crowdfunding venture by offering a valuable reward they’ll love. Just be sure not to break the bank.
  • Offer a range of investment levels. Give people options to invest so they can find the level that works for their budget. Offer tiered rewards to pair with each investment level.
  • Make it easy for people to share. Use social media to your advantage. Supporters will be more motivated and willing to share with their friends and family if it’s easy to do so.
  • Spread the word. Organize your contacts for outreach. Put together a compelling pitch that you can communicate to press, bloggers, or your network. Go offline and throw an event or share your idea with people in person.

Let’s explore the benefits, challenges, and four types of crowdfunding.

The Benefits of Crowdfunding

Crowdfunding allows individuals to support the projects or companies that they believe in. On the entrepreneur side, you have the opportunity to test your idea and get valuable feedback from potential customers before going to market. Let’s dive into four key benefits of crowdfunding.

Market Validation

A challenge for many entrepreneurs or early startups is validating whether their idea or concept will be successful in the market. While you can always test it out among a close network of coworkers, family, or friends, it’s a good idea to expand beyond this group.

The early stages of a business idea is the best time to conduct testing, gather data, and make changes. From there, you can scale. Determine whether a stranger is willing to spend money on your product, and if not, it may be time to go back to the drawing board.

Valuable Insights

By starting a crowdfunding campaign, you have the opportunity to connect and engage with your customers on a direct or personal level. With access to comments, questions, and feedback, you can quickly figure out if something’s missing from your idea.

Individuals have the chance to poke holes in your concept, so you can take the feedback and improve your product or service with ideas you previously hadn’t thought of. This direct feedback and data is truly immeasurable.

Free Exposure

A popular crowdfunding platform will have a large community and existing network you can tap into. Kickstarter alone has over 17 million backers on their site. A community like this gives you an engaged group that’s more likely to support your idea and spread the word.

Not only this, but you’re typically vetted before you’re accepted to a platform, so it gives a level of legitimacy to your new business. If you go the more traditional route in raising seed money, you won’t have the advantage of this exposure from the get-go.

Early Adopters

Investors in the early stages of your business usually become your most loyal customers. People who contribute money toward getting your idea off the ground often feel more loyal, engaged, and like they have a part in your success. Early investors are also more likely to become brand advocates, spread the word, and get other people in their network involved.

The Challenges of Crowdfunding

There’s no question that launching a crowdfunding campaign takes a lot of work. You have to put in the time and effort to build interest and buzz around your idea, which may require additional resources like a team and money. Here are four key challenges to crowdfunding.

Many Campaigns Fail

The average success rate of crowdfunding campaigns is 22.4%—which means that while this can be a viable solution for funding your startup, many campaigns fail. They require a ton of planning and work before your campaign even launches. You need early traction and attention, along with a variety of great rewards, to get people interested and keep your campaign momentum.

Not only that, but the market is very crowded. Ensure your idea isn’t already being pursued by someone else so you can stand out as unique among the noise. Keep in mind, if you fail to reach your target, it can affect your brand reputation or image and investors may be less likely to support you down the line.

It’s All or Nothing

Raising money is just the first step of many to starting your business or company. Typically, if you don’t reach your funding target, money that’s been pledged will get returned to backers. The good news is if you hit the 20% mark, it’s likely you’ll reach your final goal. Almost 80% of Kickstarter campaigns that raised more than 20% ended up being successful. Strategize before you launch your campaign, build in all potential expenses, and set a realistic goal and timeline for your project to improve your chances of success.

Platform Fees

Whether you’re launching your crowdfunding campaign on a tight budget or have the savings to help promote it, it’s important to understand that most crowdfunding platforms charge fees of their own. They typically generate a percentage of revenue from campaign funds that are raised. Kickstarter and IndieGoGo, for example, both charge a 5% fee of total funds you raise, on top of a 3% to 4% card processing fee.

Fraud Can Happen

There may be competitors or individuals that can steal your idea and beat you to market. Always keep in mind that with crowdfunding you’re exposing your idea on an open platform, so you may want to monitor who’s involved. Take advantage of private chats with investors to discuss not just your project but potential non-disclosure agreements. Consider talking with a business attorney to ensure your idea is patented and legally protected.

4 Types of Crowdfunding You Need to Know About

In what can seem like a complex industry of investment and banking, crowdfunding makes it easy to have the opportunity to grow your idea or business. Depending on your business and goals, you’ll want to choose the type of crowdfunding that’s most relevant for you.

Each type of crowdfunding has its own advantages and each platform is particular for a specific type, niche, industry, or project. Let’s break down the four types of crowdfunding, so you can determine which is the best fit for your business and decide which platform to use when launching your campaign.

Rewards-Based Crowdfunding

The most popular type of crowdfunding is rewards-based, where individuals lend small amounts of money to a project in exchange for a reward or incentive. Funding can range anywhere from $1 to $1,000 and the reward can range from the product or service, perks, or simply recognition.

Crowdfunding was brought into the mainstream by two popular rewards-based crowdfunding platforms: Kickstarter and Indiegogo. These two platforms are more common with creative and newly innovative ideas or projects.

Equity-Based Crowdfunding

With equity-based crowdfunding, investors lend a larger amount of money in exchange for a share, percentage, or, like the title says, equity in the company. They then become stakeholders or part owners. Entrepreneurs can even set investment caps and minimum amounts if they choose. Equity-based campaigns are typically used to launch a startup and last a few months or longer to raise larger funding amounts (up to $100,000 or more).

As with any investment, there’s always a possibility that you can lose a portion or all of your return, so it’s good to keep in mind not just the potential, but also the risks. AngelList, Fundable, and Crowdfunder are popular platforms for equity-based crowdfunding catered more toward venture capitalists.

Donation-Based Crowdfunding

Donation-based crowdfunding is when a large number of individuals donate a small amount of money toward a project. Because it’s based on donations, contributors don’t expect anything in return, other than gratitude from the organization and the satisfaction of supporting a cause they’re passionate about.

Many charities, social causes, and nonprofits lean toward donation-based crowdfunding to raise money so funding targets are generally lower (typically $10,000 or less). GoFundMe, Crowdrise, Tilt, and Kiva are all popular donation-based platforms.

Debt-Based Crowdfunding

Debt-based crowdfunding is somewhat similar to getting a loan from a bank, except that a large amount of individuals lend you a small amount, with the expectation that they will be paid back the principal along with interest. Contributors don’t receive a reward or equity in exchange for their investment.

Many entrepreneurs, startups, or small businesses use this as an alternative to a traditional bank loan, since they have more flexibility and options to get funds and resources. It’s most helpful to give a company the financial start they need to go on and continue fundraising.

The crowdfunding industry continues to double year over year, proving to be a valuable form of raising capital for new new startups or entrepreneurs. It helps put decision-making power into the hands of individuals and helps to fill the void in the traditional investment world. Any local business or entrepreneur who is willing to work for it has an opportunity to succeed with crowdfunding.

Understanding the benefits and drawbacks of crowdfunding, as well as the types of crowdfunding, can help improve your chances at success, and ultimately guide you toward the next steps of building and growing your own company!

Paying Taxes on Crowdfunding Income

Once you successfully raise money through crowdfunding, it may be easy to forget that you still may need to pay taxes on this money. Depending on the purpose of the campaign, the IRS still may consider those funds taxable.

There are three categories that your crowdfunding campaign funds may fall into:

  • Taxable income
  • Charitable donation
  • Gift tax

Taxable Income

If your crowdfunding campaign is dedicated to raising money for some type of business project or venture, then the funds are subject to income tax. Anyone with this type of campaign should receive a 1099-K form from the crowdfunding platform that they are using.

  • In short, a 1099-K identifies that the entity running the campaign has either received over $20,000 in funding or has acquired over 200 transactions on their campaign. However, even if you do not receive a 1099-K (i.e. your campaign earns less than $20,000 or less than 200 transactions), you are still responsible for reporting the income.

Charitable Donation

In the case that the crowdfunding campaign is run by a charitable organization or nonprofit, then the funds that are raised are not subject to taxes. It is important that if you are looking to raise funds under a charity or nonprofit, that the organization is qualified—otherwise, the funds may be subject to taxes.  For anyone who donates to a charitable campaign, the donation is seen as tax-deductible in the eyes of the IRS.

Gift Tax

Individuals with a crowdfunding campaign that is not associated with a business or charitable organization could be subjected to paying gift taxes on the funds that they raise. However, gift tax is only applicable to total funds of over $15,000. As long as your total gift tax exclusions for the given year do not exceed this limit, then the funds you raise will not be subject to gift tax.

Raising Funds for Start-Ups

A new entrepreneurial journey can be pretty unnerving especially during fundraising. With dynamic changes and formalisation of the economy, start-up businesses have to avoid traditional bottlenecks like inconsistent balance sheets, and lack of collateral, or detailed business plans, or financial estimates for business cyclicality or preparation around fund requirements.

An entrepreneur must own his/her business plan, analyse capital movements and investor requirements, be ready to answer the tough questions from investors and create a strong and structured organisation with capable people who will deliver under adhered timelines.

Before considering fundraising, an entrepreneur must consider budget planning for a year, the kind of funding one should seek and who the ideal investor should be. Funding can come from many sources – family, winning at pitch competitions, working capital loans, bootstrapping and even revenue for regular operations.

 The nature of funding varies from business to business and the stage of the business is critical.

Why raise capital?

A start-up business is meant to grow fast. Such high growth companies nearly need to burn capital to keep the wheel of growth moving before achieving profitability. Some start-ups prefer to bootstrap (self-fund) themselves. All start-ups entrepreneurs must introspect and decide how fast they want to grow which will determine whether funding is required or not.

When to raise capital?

Every new entrepreneur must know that investors will lend them an ear only if they have a very compelling idea backed by a fantastic founding team and a realistic business vision. The market opportunity has to be real and sufficiently large enough for entrepreneurs to give that product/service in terms of customer adoption.

How much to raise?

Fundraising is primarily done to check market feasibility and scope of growth for a product/service. When negotiating a fundraising amount, an entrepreneur should consider the kind of progress one is looking at, if the funds raised will be sufficient for growth and profitability or there would further rounds of capital or equity dilution one may be comfortable with. Ideally, an entrepreneur should look at raising an optimal amount of fund in the first round which will help one decide how many months of business operations can that take care .

There are no mathematically accurate answers to any of the above. But a few thumb-rule fundraising lessons don’t hurt.

  1. A new entrepreneur must ideally have an appropriate business name that should ring well with employees, business partners, investors and potential customers.
  2. A ‘NO’ from investors is not the end. It means still following up with updates, calling them and continuing to work because you believe in it.
  3. An entrepreneur should not compare with other businesses. An entrepreneur should cut the noise and baggage around what others think about them or their business acumen, or what they can/should do against their success or lack of one.
  4. A new entrepreneur should make informed decisions when raising capital. They should spend more time acquiring customers than attending meetings to acquire debt.
  5. A new entrepreneur should take time to celebrate their assets and resources, customers and teams, community and revenue.

 

 

Entrepreneurship Development

Entrepreneurship development is the process of improving the skills and knowledge of entrepreneurs through various training and classroom programs. The whole point of entrepreneurship development is to increase the number of entrepreneurs.

By doing this, the pace at which new businesses or ventures are made gets better. On a wider level, this makes room for employment and improves the economy of a business or country. The steps below will explain how to create an effective entrepreneurship development program and how to go about enhancing it.

Outline the objectives of the program and focus on the venture development

Entrepreneurship development aims at individuals who want to start or possibly expand a business. Entrepreneurship development also focuses a lot on enhancing the ideas and potential of an entrepreneur.

The aims of a program have to be clearly explained otherwise the program will never reach its full potential. The development of a venture also has to be outlined in the program. Without these two, there will be no clear goal.

Select educated people who have high entrepreneurial potential

An entrepreneurship development program requires that various people be selected. However, most programs tend to look for a specific group of educated people rather than target everyone. Ideally, you have to look at the education and traits that you are looking for, in an entrepreneur, and match them with the people who have applied for the program.

Most people say that public funds should be spent on people who need the most help. The resources of an entrepreneurship development program are usually (and unfortunately) limited. It is hence better to choose people who will prove to be really useful and benefit the entire community.

Select uneducated people who have high entrepreneurial potential

A development project on women’s entrepreneurship in Nepal was recently conducted. It was found that women who couldn’t meet the essential needs of their family or themselves were usually more eager to learn about different ways to earn money as compared to women who were better off. However, such women usually face many problems.

Even though such women are not educated, they have great entrepreneurship potential because they have the right motivation. Such people need to be aided by assistance packages where training can be given on entrepreneurship. This will instill confidence and teach them the skills they need in order to provide for their family.

Identify the local market and search for people who have potential in it

Entrepreneurship development programs should first identify the local market and aid potential entrepreneurs who know a lot about it. These people need to be able analyze and then design unique ideas based off the needs of their surroundings.

By concentrating on select local entrepreneurs, the effects of the program can be easily and quickly seen within the community. Later on, programs can help improve their knowledge in their sector. In fact, it is creativity and the thirst for innovation that truly matters rather than the market’s size. In later programs, the introduction of new products and product features can be added. This will add value and increase the size of the market

Provide support through private sector-based organizations

Support should be obtained from private organizations that are both financial and knowledge-based. This helps reduce the cost of the entrepreneurship development program and increases its effectiveness.

Private organizations that could support entrepreneurship development programs include universities, consulting companies and various NGOs. Large enterprises are also encouraged to support entrepreneurship development programs as this their sponsorship that will help reduce unemployment.

Provide an easy yet detailed methodology that will help entrepreneurs improve in the short and long-run

Entrepreneurial development programs aim at being simple to understand and teach skills that entrepreneurs can use after the program. It also contains courses that aim at developing their skills and ideas. These are required if entrepreneurs wish to successfully exploit the local market.

They also need to be taught how to gather the required resources in order to meet the goals of their venture. The program also needs to have outlined methods through which entrepreneurs can improve the performance of their business in the long run.

Entrepreneur development training proves to be highly effective when finance, quality assurance, marketing and productivity are linked to the training program. As an example, when development banks are involved earlier in the process of training, an entrepreneur will easily understand credit processes and the also praises the bank’s business plan.

Implement special measures to improve the usefulness of trainers and facilitators

The Success of an entrepreneurship development program also relies on the commitment and quality of the many facilitators and trainers. Any trainer or facilitator in the program needs to understand the culture and lifestyle of the group in order to better integrate themselves and serve the group.

The selection of proper trainers is based on the amount of business experience they have and the how much knowledge they have about their local business environment. Training facilitators can significantly improve their usefulness in tackling the needs of entrepreneurs.

The selection of areas for pilot programs must be right

Entrepreneurship development programs are usually too restricted in terms of where it is done and what people are involved in the program. Selecting pilot target areas will usually depend on the ease at which support institutions are available.

It will also depend on the interest people take in entrepreneurial development programs. These facts can never be the same for any two geographical locations and hence must be considered carefully.

Launch pilot ED programs and develop as needed

Analyzing pilot feasibility is an effective way of launching a major entrepreneurship development program. If the program shows signs of high promise, it can be launched on a national level. By relying on the sponsors for support rather than donor support, the program will be able to expand past local development while maintaining high quality. This is especially important when the support of donors starts to fade.

A successful entrepreneurship development program requires government policies

Entrepreneurship helps the economy of a country grow and creates new jobs. Government policies usually have a substantial impact on the number of entrepreneurs in a country.

While there are many governments that say they do support entrepreneurial businesses, they usually do not have many specific policies and programs that effectively support entrepreneurial development.

Creating an effective entrepreneurship development program may not be easy but then again, it is not impossible either. By carefully following the ten points above, you are well on your way to creating an entrepreneurship development program that not only benefits your company in the short run but in the long run as well.