Welcome to the inspiration and exciting world of crowdfunding! If you are an innovator and early adopter of products and ideas, then crowdfunding may complement how to source and interact with product and idea creators.
Make sure that you are ready to be a backer in crowdfunding projects by taking this quick questionnaire. Crowdfunding is not a typical pre-order or sale transaction, and has its own nuances.
Introduction to crowdfunding
Crowdfunding is used by business to raise money for various purposes, such as for manufacturing products to be sold, for fund-raising for a cause, or to source the capital structure (debt and stocks). Accordingly, there are different types of backers in crowdfunding. This website focuses on crowdfunding for products, and this is also known as rewards-based crowdfunding. To be a backer in a rewards-based campaign is different compared to other types of backers.
Crowdfunding via any of the online platforms is completed by means of a crowdfunding campaign. The campaign has milestones, as measured by the funding goal and the time period that the campaign runs.
There are some specific crowdfunding words and phrases that you should become familiar with, and, in general, these terms are used on the majority of online platforms.
As you start to research and back projects, you’ll notice that you will be interacting with three parties: the crowdfunding platform, such as Kickstarter; the project creator and Amazon Payments. The boundaries between these three parties may be blurred at the beginning, but your involvement and transaction with each party is unique.
It is also really important to understand whether the transaction is a gift, donation or sale. because this has a direct implication on your rights and responsibilities, as well as those of the project creator.
Once you have selected which online platform that works for you, you will start to review the projects listed. Each online platform has a project description for each listed project. If the project appeals to you, then you can start the backing process. During the campaign, you have various options on how to manage your pledge to the project.
Risks and rewards
Crowdfunding is risky because of the different backgrounds of the project creators and the nuances of the actual underlying transaction. But, crowdfunding has its own rewards for backers. Backers play a very important role in this fund-raising journey!