Reward Crowdfunding

Platforms like KickStarter and IndieGoGo help people raise money for a project or for a cause through crowdfunding. You can leverage these platforms to raise money for your business by offering a (future) product or a token reward such as a “Thank You” card, t-shirt or handmade candle. If you are not raising a huge amount of money (e.g. – < $5,000), this can be a viable option with few strings attached. However, in order to raise funds successfully, you have to be very good at marketing and present your product/business in a way that resonates with people.

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What You Need to Know About Reward Crowdfunding

Pros: Cons:
You don’t pay your investors — you reward them with whatever you feel is appropriate If you don’t raise at least your goal amount of money, you may not raise get any of the funds
Great way to validate your product with future customers Takes a lot of preparation + marketing effort
No need for collateral Most charge a small closing fee

Best Candidates for Reward Crowdfunding:

  • Businesses with a compelling B2C product
  • Businesses with a great business pitch
  • Businesses looking to validate their business idea
  • Nonprofits

Nav’s verdict:

It’s a great option if you have a compelling product/project and know how to market it. Keep in mind that the time you will spend coming up with a great campaign is probably going to be quite a bit more than the time you’d spend on a loan application or investor presentation.

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