Reward Crowdfunding allows a businesses, or even individuals, to raise working capital utilizing the reach and efficiencies of the world wide web. Typically these campaigns are posted and run through online, fee-based crowdfunding platforms such as Kickstarter, Indiegogo, and GoFundMe. This type of financing is usually geared towards start-ups looking to fund a new product, idea, service or project.
Anyone can contribute (think “donation” instead of “investing”) to a Reward Crowdfunding campaign and it’s typical to see the available donation levels range from $10 - $500. The idea, of course, is to appeal to the largest audience as possible. In 2015, the total amount of funding provided to companies through donation and reward crowdfunding was $5.5 billion!
The money raised through a Reward Crowdfunding campaign does not have to be paid back nor do investors receive any equity in the company raising money, rather, the business typically will provide a “reward” in return for a donations to the campaign. For example, a new video game developer may give a game t-shirt to those pledges at the $20 level, and for those that contribute $100, a retail copy of the game when it becomes available. It isn’t necessary to provide an reward, as sometimes donations are given just to help in a company’s development or an individual’s cause.
Although there are significant advantages to this type of Crowdfunding, there still remain several important items to consider before launching your campaign.
For more information on Reward Crowdfunding, or to discuss how we may assist with your Reward Crowdfunding project, please Contact Us.
Reaching your campaign's financial goal doesn’t guarantee success; the business plan still has to be executed properly!
The Oculus Rift, a virtual reality headset, initiated a Kickstarter campaign in 2012 to fund the Rift's development, after being founded as an independent company two months prior Oculus raised $2.5 million and in in March 2014, Facebook purchased Oculus for $2 billion.
However, in 2014, “Coolest Cooler” raised over $13 million for their “portable party” only to suffer numerous manufacturing and fulfillment set-backs, not something that many early investors have warmed up to, potentially putting the company’s future on ice.