Entrepreneurs can use the Project PowerUp website to pre-sell their product or service, and then use the proceeds as seed capital to start their business.
“The beauty of crowd-funding is that you don’t have to pay the money back, unlike a loan, and you don’t have to give away any equity either,” Wardell says.
Wardell talks to StartupSmart about starting a business designed to help other start-ups.
What inspired the idea for Project PowerUp?
At the start of this year, I came up with a really good business idea. Problem was, I needed about $50,000 to get it off the ground.
I got knocked back by just about every bank in Australia when I applied for a loan because I was inexperienced and didn’t have much in the way of personal assets to secure a loan.
My younger brother is an independent filmmaker and one night he told me about a few US-based crowd-funding sites in the US, which his friends had used.
Nearly all of these sites catered solely to creative projects like independent films, music and other “artsy” stuff.
So on the one hand, I saw an awesome new business model that was raising lots of money (online crowd-funding), and on the other hand there is another untapped market that, I believe, is an even better fit for crowd-funding (entrepreneurs).
I put both of those concepts together and came up with Project PowerUp.
How long did you work on the business before you launched it?
Things actually moved really quickly. I came up with the idea in May, moved into Fishburners (cop-working space) and found some web developers in June, and had the self-launch site up by late August.
How did you fund the business?
So far, it’s been funded from my savings and credit cards. I also recently got a micro-enterprise loan from NAB, and the $2,985 we raised from the self-launch also helped.
We’re now looking at raising an angel funding round as soon as the first batch of projects is successful.
What were your start-up costs?
Start-up costs were about $20,000 – more than half of that has gone into the website.
How do you generate revenue?
Project PowerUp takes 10% of all funds raised for successful projects in addition to transaction fees of 2-5% based on transaction value and volume charged by credit card and payment processing companies.
What are your revenue projections for 2011/12?
We’re aiming for $100,000 in our first year of operations.
How many staff do you have?
Four staff in total but I’m the only full-timer.
How do you promote the business?
I haven’t actually spent a single dollar on advertising yet. We’ve been fortunate in that we managed to attract quite a lot of press attention and that’s really important for us.
We’re also in the process of partnering up with a few young entrepreneur organisations – both in Australia and overseas – and are always hunting for more JV partners.
Finally, Project PowerUp is inherently viral. The whole process relies in people telling their friends, relatives and colleagues via email and social media.
It’s one of the main strengths of the business model and one we’re keen to capitalise on.
What are your points of difference?
We are the only crowd-funding site in Australia to focus purely on business-related projects, rather than artsy or creative projects.
We offer a lot of support services. For example, we help our clients write their pitches and structure their rewards, and promote their project.
We can also offer significant savings on professional videos thanks to our partnership with Blue Clay Productions.
We also have a number of partnerships and innovative new features to announce soon, but I’m not quite ready to discuss them publicly just yet.
What has been your greatest challenge and how did you overcome it?
When I first told people about my idea, there were a lot of doubts raised.
Would it work in Australia? Would it work for businesses rather than creative projects? What about the possibility of fraud? Won’t people steal my ideas?
And most of all – will people really pledge enough money to get started?
So I proved the business model in the best possible way – by using it myself. We used Project PowerUp to crowd-fund Project PowerUp.
We set a funding target of $2,500 in 30 days. We ended up raising $2,985. The first $500 came from friends and family but the rest came from people who saw the project, liked the idea and put some money on the table to make it happen.
We didn’t spend a single dollar on advertising but we were fortunate enough to receive quite a lot of media attention.
What’s the biggest risk you face?
At the moment, there is a bill before Congress in the US to legalise crowd-funding equity for small businesses.
There are all sorts of restrictions to prevent that in most countries around the world, which is why, at the moment, crowd-funding is based on pre-sale of goods and services rather than equity.
Crowd-funding equity is really the endgame for Project PowerUp and the Holy Grail as far as we’re concerned.
If that bill passes too soon, and our bigger competitors are able to capitalise on it before we can, that’s going to be a real blow.
So right now, I’m very focused on growing and expanding internationally as fast as we possibly can.