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
|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 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
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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