If you are thinking of becoming a backer for a project on a crowdfunding platform, such as Kickstarter, ask yourself these six questions:
- Do you have some extra money that you are currently not using for day-to-day expenses, debt, savings or investments? This “extra” money should not come from your credit card.
- Can you afford to pledge an average of $40 for a project, knowing that you are risking losing your money if you don’t get a product or service in return?
- Have you set up a crowdfunding budget for yourself? It is all too easy backing many projects, but when the funding period closes, can you afford to pay for the projects you backed, and are you within budget?
- Are you an active participant in the online community? Do you share, flattr, pin it, tweet etc?
- Are you okay with delayed gratification? Do you understand that you are likely to get the product only after an average of 6 months since paying?
- Are you an early adopter and innovator when it comes to products? Do you enjoy getting prototypes or the first edition? Do you actively seek out new products to buy?
If you answered “Yes” to all of these questions, you share some of the characteristics of backers in crowdfunding. Before you start on your journey as a backer, you need to understand what type of backer you want to be, the process of crowdfunding from a backer’s viewpoint as well as the 10 considerations you should weigh up before and during the project’s funding period.
If you answered “No” to any of these questions, then maybe crowdfunding isn’t for you. Rest assured, if a product succeeds, you will be able to buy it commercially through high street and mall retailers within the next year or so. If you are a new participant to online community, maybe try smaller steps first, for example using Flattr or contribute to your favourite website via the contribute button. And if this agrees with you, you may want to consider crowdfunding next.
Being a backer for causes
If you are considering backing a project for a cause / charity, make sure you understand the implications of using a general crowdfunding platform, such as Kickstarter, and what you are seeking to achieve.
Being a retail backer
If you are a retailer, you need to be able to answer these questions:
- Do you have trade insurance or a provision for ordering products via a crowdfunding platform?
- Do you have a budget for these products?
- How does the crowdfunding model align to you business model ,especially considering manufacturing and shipping?
- Are you customers early adopters and innovators, or will you have to market these products to them?
- Are your shareholders and stakeholders aware that you are sourcing products via crowdfunding, and how does this align to the overall strategy for the company?
- Does the supply chain of the crowdfunded project align to your sustainability goals?
There are important accounting, tax and legal implications for a retail backer, and you need to make sure that you fully understand these.