What is Crowdfunding (also called Crowdsourcing)?
It was approved as part of the JOBS Act (Jumpstart Our Business Startups Act). It provides an online money-raising strategy where the public can contribute small amounts of money and receive “rewards” (generally product or service) for their contribution. It began as a way to help artists, musicians, and filmmakers finance their projects. It has expanded to include small businesses, real estate, video games, non-profits, and many more niche areas. In the United States, equity (stock) in the company is not allowed as part of the reward.
Where is Crowdfunding?
There are funding portals (websites) that advertise funding opportunities and facilitate the payment from the contributor to the owner. The most popular are Kickstarter, Indiegogo, Razoo, RocketHub, and FundAnything.
What are Examples of Rewards?
•Free mp3 download
•Listen to an album before it’s released to the public
•Reprint of artwork
•Invitation to open house/dinner/launch party
What goes into a Crowdfunding project?
•Description of project
•Usually a short video
•Different ranges/levels of contribution
•Your organization information
•How you will use the money
•What you will deliver and when
What should you watch out for?
•Funding targets and deadlines
•Escrow accounts and $ disbursement
•What happens to the $ if the project fails
•Funding portal fees, 4%-10% of project funding is common
•Can you deliver?