5 Tips If You’re New To Crowdfunding

If you’re a seasoned crowdfunding project backer then these tips might seem a bit “Janet and John”.  But if you’re new to crowd funding, you’ve seen a project that’s caught your attention but you’re not sure what you’re letting yourself in for, then here’s 5 tips to help you through the first steps.

1. Understand the Different Types of Crowdfunding

Crowdfunding is very broadly split into two categories: rewards-based funding and equity based funding. Rewards sites, as the name suggests, offer you some kind of reward for backing their project. With an equity funded project you own a piece of the entity that you’re backing, so if you invest money in a company then you own a share of it. This is an important distinction because although rewards based crowdfunding can take a company to the next level, you don’t have any claim to the company’s future success which may arise off the back of it. This is should pretty clear on the platform you’re using but make sure you know what type of campaign it is that you’re backing.

2. Research the Campaign

You don’t have to spend forever on Google checking things out but do scrutinise a campaign before pledging.  In the technology categories which is where I do most of my crowdfunding support, there are a lot of projects which are just a bit too generic, usually starting with the words “Let’s build….”.  Sometimes these are well-meaning ideas but with unrealistic targets, others are projects run by chancers looking for a bit of easy cash.  As an example, if someone is claiming that if you invest £50 in their project then you’ll get a fully functioning Death Star…. you probably won’t.

3. Only Pledge as Much as You Are Prepared to Lose

Project owners want their campaigns to succeed.  Sadly, sometimes things don’t work out and if that happens then there is a chance you’ll get no reward or lose your equity stake.  Those are the knocks unfortunately and, whilst the vast majority of projects do exactly what they say on the tin, there is a chance that you could up with nothing.

4. Expect Delays

Project owners generally assess the risks before starting a crowdfunding campaign and look at where the weak links are.  They nearly always get it wrong.  95% Of the projects I’ve backed have been subject to delays due to unforeseen circumstances.  It’s a fact of the design process so be patient, the project owner is almost certainly working their socks off to overcome the problems and if they are doing a pretty good job of keeping you informed then generally speaking, all is good.

5. Be Nice……

I see a lot of nastiness on some of the project message boards.  I understand that if people don’t get the thing they were promised when they were promised it then there is bound to be some anger.  But do try to remember that you are investing in a design process, you’re not making a purchase from a retailer.  Project owners running themselves ragged trying to deal with a myriad of problems is counter-productive.  Obviously if you have concerns you should contact the project owner but taking to social media with your tales of woe punctuated with the phrase “PLEASE SHARE!!!” is unlikely to help.  In fact, it’s likely to make things even more difficult.

I hope these tips are of use.  As always, I welcome your comments…… PLEASE SHARE!!! 🙂