Strategies: 7 keys to crowdfunding success

• 2012%27s Jumpstart Our Business Startups %28JOBS%29 Act allows start-ups to raise cash through crowdfunding
• Process offers an alternative to asking friends%2C family or venture capitalists for financing
• But it requires you to show specifics%2C market your dream to persuade hundreds of others

Want to raise money for your new product, company, or creative project?

A hot new option, crowdfunding, has all kinds of people — entrepreneurs, small-business owners, inventors, investors, artists, speculators and crooks — excited.

For many years, entrepreneurs and aspiring small-business owners had only two options when seeking investors.

They could beg financing from a small group of those closest to them, what's referred to as friends, family, and fools. Or if they had a truly promising concept, they might be lucky enough to raise money from angel investors or venture capitalists.

But one thing they couldn't do was to spread a wide net to people who thought they had a good idea and wanted to help get their vision off the ground.

Historically, to protect unsophisticated people from losing money in highly risky start-ups or from being scammed by con artists hyping the next big thing, U.S. securities laws prohibited private companies from raising money from more than 35 non-accredited investors, i.e. people with significant personal wealth.

These laws seemed to work to protect the public until the dot-com era. Then many people suddenly got very rich from investments in early stage Internet companies.

Because of the accredited investor rule, it seemed as if only the wealthy were allowed to get in on the gold rush. The laws also limited the amount of money available to new ventures.

So, in 2012, Congress passed the Jumpstart Our Business Startups (JOBS) Act. Among other things, the law allows start-ups to raise money from the public through crowdfunding sites.

However, the terms "crowdfunding" or "crowdsourcing" became widely popular before the JOBS act and often are used to refer to three different types of support:

• Crowdsourcing is reaching out to a large number of people for non-monetary support: ideas, involvement or feedback.

In this way, you can get valuable input from potential customers about your idea or gather support for your creative project.

• Nonequity crowdfunding is soliciting money for a benefit other than equity: the pre-sale of products, invitations to special events, recognition as a sponsor, small gifts.

This can be a great way to make money before you've developed or finalized your new invention without giving up any ownership.

• Equity crowdfunding is soliciting money from a large number of individuals in return for small amounts of stock in the new company.

While new regulations allow for this kind of fundraising, it still has many restrictions.

An explosion of sites now makes crowdfunding easier. Each platform has its own specialties, rules, and limitations.

Two of the most established are IndieGoGo and Kickstarter. Many crowdfunding sites are evolving to serve specific industries or niches, such as CircleUp for consumer and retail products, RallyMe to raise support for athletes, Mosaic for solar projects.

The site Crowdsunite can help you find the right crowdfunding site for your needs. Here are the keys to crowdfunding success for your small business or start-up:

1. Have the right type of product or business. A large number of people must be able to understand your idea easily. Consumer, food, consumer electronics, and fashion products are particularly well suited to this.

2. Create a compelling video. Most people will want to hear your story, see who you are and see prototypes of your product.

3. Raise sufficient funds. On some crowdsourcing platforms, you don't receive any money until you raise your total goal.

This means you want to set an achievable fund-raising target. But you may not be able to go back for additional rounds or raise more than your target, so make sure you set the bar high enough to execute your vision.

4. Choose the right crowdfunding platform. Make sure the site you choose meets your particular needs, including the right type of product or service, the type of rewards or equity you can give, the amount of money you can raise and the amount you need to raise before receiving anything.

5. Have good quality photos as part of your campaign. Pictures help supporters spread the word about your venture through social media.

6. Make sure you have a "coolness" factor. Your idea is more likely to garner support and go viral if it's unique, attractive and cutting edge.

7. Plan a marketing campaign. You must plan your crowdfunding fund-raising campaign as if you were launching a new product.

It will take creativity, effort, and a lot of time.

Rhonda Abrams is president of The Planning Shop and publisher of books for entrepreneurs. Her most recent book isEntrepreneurship: A Real-World Approach. Register for Rhonda's free newsletter at PlanningShop.com. Twitter:@RhondaAbrams. Facebook: facebook.com/RhondaAbramsSmallBusiness.Copyright Rhonda Abrams 2014.