A Brief Q&A on Crowdfunding

In recent years, crowdfunding has been all over the place. If you’ve managed to avoid any knowledge of crowdfunding, the short story is that it’s a new way for people to raise money. There are several different platforms these days, like Kickstarter and Indiegogo, and each has a different process you must navigate to raise funds. For the purpose of this blog, we’ll focus on crowdfunding in general to provide a broad overview. So, what is there to know about crowdfunding? Are there any risks? How can you be sure that your startup is ready? Let’s discuss.

1.  What is crowdfunding?

Crowdfunding is a way for people to fund their ideas by getting support from casual investors – a.k.a regular people like you and me. Often the investor will get something in exchange, such as merchandise, early access to a product, or even a cameo if the project being funded is a movie or documentary. The campaign will have a monetary goal to meet, and once it does, the campaign usually ends so the project can get going and investors can get their stuff.

2.  Who should start a campaign?

Although it seems like something everyone would want to use, it’s important to note that crowdfunding isn’t for everyone. Thousands upon thousands of crowdfunding campaigns fail every year because the idea wasn’t right for the platform. It’s a good idea to look for campaigns similar to yours and see how they fare on different crowdfunding sites.

3.  Do you know how much you actually need?

Before you start a campaign, you need to make sure that you have truly thought out exactly how much you will need to make your idea a reality. And we don’t just mean how much you need to get started, we mean enough for every aspect of the project, such as filing costs for patents or trademarks, a cushion in case something is more expensive than anticipated, and so on. If you don’t do this step right, then you might fail to deliver on the promises made to your investors, which could land you in more trouble than the entire campaign was worth in the first place.

4.  What will I need to present to my investors?

To have a successful campaign, you also must make sure that you have fleshed out your ideas as much as possible. If your invention isn’t completely developed or you haven’t been able to test its intended functionality, your investors may want to see your plans. You should be prepared to show everything there is to know about your plan to each and every person who sends money your way.

Contact IGC Today

Setting up a crowdfunding campaign can be tricky, and this blog is just a brief introduction to everything you need to think about before you start one. Not only do you need to make sure that you actually can benefit from crowdfunding in the way you want, but you also have to follow all of the rules and regulations that go along with raising money in that way. At IGC, we have the experience to help you determine whether crowdfunding is right for your idea. Contact us to speak with a member of our team today.

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Written by Integrated General Counsel

Our focus includes handling a variety of corporate matters and also includes litigation in state and federal courts. Our current practice includes providing transactional services and representing a variety of small and medium-sized companies as their outsourced general counsel.