Crowdfunding

The following show how donations, rewards, and equity investing differ from
each other money wise. Each type of funding has their own perks and ways of getting the
funding you need for your company. There are three main types of crowdfunding including
donations, rewards, and equity.

Donations Funding

Donations are typically for personal or non-profit organizations that are towards a greater
good. While donators dont get anything in return for donating to your cause, it is still required to
pay the fees associated with the platform that you are using.

Reward Funding

Rewards is a type of funding where the company offers some type of reward for
investing, which is typically an item based on amount invested. While the most popular
investment amount is $25, adding in additional higher dollar amount rewards can help most
campaigns, thus include several higher priced rewards between $100 up to a few thousand
dollars. It is critical to figure out the cost for your campaign by considering the rewards you
provide and how many backers you will need to get at each reward level to make your overall
goal. For example, if all of your funding came at the average of $25 per person, and you assumed
that 3% of your campaigns visitors actually fund your campaign, youd have to reach over
66,000 qualified people on the web and get 2,000 of them to fund your campaign (Barnett,
2014).

Equity Funding

In equity crowdfunding, the investors receive a share of the company based on the
amount invested. Though most companies can get commitments at $50,000 or $100,000, in some
ways it can be easier to find many investors at $10,000 than it is to find one or two investors at
$200,000 to $500,000. By lowering the minimum investment amount down to as little as $1,000,
you lower the risk exposure for any single investor, and entrepreneurs often find it much easier to
get the investment and support of many investors online at these amounts (Barnett, 2014).
 Summary of Crowdfunding Platforms

Below is a summary of a few popular platforms for funding your campaign. It is important to
pick the right platform for your campaign in order to be successful.

Kickstarter
o Kickstarter has become synonymous for crowdfunding, as the most popular
site to find funding for creative projects
o 5% of funds raised, with an all-or-nothing model that builds urgency but lead
to the loss of all funds if the goal isnt met, plus 3-5% transaction fees
o Name recognition, highest traffic allows for greater project visibility
o Approval process, limited to creative projects, only allows projects based in
the US and UK
Indiegogo
o This flexible crowdfunding site serves as an open and accessible option for
campaigns worldwide
o On the all-or- nothing plan, 4% of the funds of successful projects go to
Indiegogo. On the flexible funding plan, Indiegogo charges 4% if you reach
your goal, 9% if you do not reach your goal. Transaction fees are an additional
3%
o No application process, available in every country, diverse spreads of projects
o More expensive if you dont reach your goal, but without the urgency of the
all-or-nothing plan
Crowdfunder
o This platform blends donation-based and investment crowdfunding models, as
well as encouraging online and off-line crowdfunding and collaboration
o 5% with an all-or-nothing format, plus 1.9%-5% Amazon FPS Transaction fee
o Mixes online and offline crowdfunding, emphasis on businesses long-term
growth
o For-profit companies only
(Taylor, 2013)

Tips for Creating the Perfect Crowdfunding Campaign

1. Strategic Social Media

a. Pick networks that best match your marketing and content strategies and where
your potential supporters are most likely to be found
2. Create a helpful website
 a. Have more than a Facebook page, somewhere where the media can get
information and high resolution pictures of your company and products
3. Produce a great video
a. Video clips give visitors a better idea of your project- they can see you or your
product in action rather than clicking through a series of static images
b. Although they are labor-intensive, and an amateur-looking video isnt going to
convince anyone to get involved, and at worst, could damage your campaigns
credibility
4. Dont ask for money immediately
a. Tell your story and share your enthusiasm for your project and how your project
effects the community, then people will naturally want to add their support;
remember supporters are giving you money with the expectation of getting
something back
b. Introduce your team to let your supporters meet the people behind your project
5. Make a budget and include it on your campaign page
a. While not detailed, a budget will show potential backers that youve done your
homework; your funding goal should be the minimum amount necessary to
execute your project; dont go too low, you are responsible for delivering rewards
to your backers if your campaign is successful; leave cushion to pay for fees as
well
6. Communicate often
a. Keep your backers and potential backers in the loop; post regular updates and
keep the process going after the campaign has ended
7. Appeal to your existing fans
a. Consider the fans and supporters that you already have, making your project goals
and rewards something that these people are going to be ready to identify with
b. Most support will come from people you know; reach out to anyone you know,
once the funding window is open reach 20% of your goal as soon as possible;
while 10% of projects never receive a single pledge, 80% of projects that manage
to raise more than 20% of their goal end up being successful
8. Keep your campaign under 30 days
b. A campaign can be anywhere between one and 60 days, a longer campaign
doesnt necessarily mean people are going to give more; projects lasting 30 days
or fewer have the highest success rates
(Entis, 2016) (Hangen, 2016)

Title III
Title III of the Jumpstart Our Business Startups Act is important when considering what type of
crowdfunding you want to do. Crowdfunding is still young, so it is critical to keep up on new
legislation, such as Title III, when preparing a crowdfunding campaign.

9. New equity Crowdfunding rules

c. rules allow startups to raise up to $1 million in capital through the sale of
securities via a registered broker or an online crowdfunding portal over a 12-
month period. The rules impose initial and ongoing disclosure requirements about
the business and its securities offering.
d. Failure to comply with the rules carries a steep penalty in the form of
disqualification from offering securities, which could have a negative impact on
potential future funding raising
e. Businesses conducting an equity crowdfunding campaign must disclose:
information about officers and directors as well as owners of 20 percent or more
of the company; a description of the issuers business and the use of proceeds
from the offering; and the price to the public of the securities or the method for
determining the price, certain related-party transactions; and financial statements
accompanied by information from the companys tax returns, reviewed by and
independent public accountant, or audited by and independent auditor. According
to the rules, businesses must amend the offering document during the campaign
period to reflect material changes and provide updates on the issuers progress
toward reaching the target offering amount. They must also file an annual report
with the SEC and provide the report to investors.
(Drake, 2016)
 References
Taylor, K. (2013, August 6). 6 Top Crowdfunding Websites: Which One Is Right For Your

Project? Retrieved September 04, 2016, from

http://www.forbes.com/sites/katetaylor/2013/08/06/6-top-crowdfunding-websites-which-

one-is-right-for-your-project/#778fc45f65f8

Drake, S. (2016, June 27). New Crowdfunding Rules Could Do More Harm Than Good For

Some Startups. Retrieved September 04, 2016, from

http://www.forbes.com/sites/samanthadrake1/2016/06/27/new-crowdfunding-rules-could-

do-more-harm-than-good-for-some-startups/#ca014e63195c
Barnett, C. (2014, July 3). 7 Crowdfunding Tips Proven To Raise Funding. Retrieved September

04, 2016, from http://www.forbes.com/sites/chancebarnett/2014/07/03/7-crowdfunding-

tips-proven-to-raise-funding/#4761055f4bb1

Pricing & Fees. (n.d.). Retrieved September 04, 2016, from http://www.gofundme.com/pricing/

Alsever, J. (2015). The Essential Guide to Crowdfunding. Retrieved September 04, 2016, from

http://www.inc.com/magazine/201507/jennifer-alsever/join-the-right-crowd.html

Hangen, N. (n.d.). 10 Secrets of Highly Successful Crowdfunding Campaigns. Retrieved

September 04, 2016, from http://ignitiondeck.com/id/10-crowdfunding-secrets/

Entis, L. (n.d.). 6 Tips From Kickstarter on How to Run a Successful Crowdfunding Campaign.

Retrieved September 04, 2016, from https://www.entrepreneur.com/article/234707

CircleUp. (n.d.). Retrieved September 04, 2016, from https://circleup.com/