4 Tips for Rewards-Based Crowdfunding Success
Mihir Gandhi
Rewards- and donation-based crowdfunding models often get confused as the same thing. They’re not. Donation crowdfunding relies on donors who do not receive anything in return for their financial contribution. Rewards-based crowdfunding involves giving a reward in recognition of the pledge. It’s understandable that there is confusion because many donation-based crowdfunding campaigns now offer rewards. If you think about it, donation campaigns have always been crowdfunded and usually have offered rewards. Remember the telethon fundraising campaigns that offer incentives for donations? They’ve been around ages longer than Kickstarter or Indiegogo.
Choose the Right Rewards
Choosing the right rewards can make or break your crowdfunding campaign. You want to offer rewards that are interesting enough to draw funders in, but they have to be realistic for you to create, coordinate, offer and deliver.
The types of rewards you can offer in exchange for funding are as varied as your imagination will allow. Rewards can include credits, products, discounted services, special VIP treatment, or anything else that’s relevant and representative of the purpose for which funds are being raised. Sometimes the silliest rewards, such as having a character in a video game named after you, are the most enticing. You can set a tiered approach to rewards, where the size of the donation determines the specific reward.
Know the Cost
Understanding all the costs of the rewards you choose – out-of-pocket financial as well as time commitments from your team – is a critical step in ensuring you come out of the crowdfunding campaign ahead of the game. Don’t get carried away with rewards and remember to factor in the cost of those rewards.
Write a Plan
The more detailed you can get in writing the plan for your rewards-based crowdfunding campaign, the more likely you’ll be to spot – and correct – possible pitfalls, where you’ll need extra help, and exactly how you are going to delivering on your commitment to deliver the rewards. Research tells us that many of the rewards committed during the crowdfunding phase are delivered late, and sometimes not at all. Don’t risk the damage to your credibility that being unable to deliver on time will generate. Be brutally honest in your plan and be sure you will be able to hit your commitments on time.
Think Hard About Hiring Professional Marketers
The key to any successful campaign is getting the word out. It can be all consuming, filling up all of the blocks of time you’d planned to spend working on your business. There will be a budget associated with hiring a professional marketer for your campaign, but it will be well worth the significantly increased chances of reaching your funding goals. Don’t forget the video. In today’s crowdfunding world, the video is king of marketing.
Updated 5/25/2022
Much of the new ideas that permeate modern finance have existed in some form or another. Even modern accredited investor based laws are built on top of laws dating all the way back to 1933. In order to stay updated and relevant, fundraisers need to be aware of all of the crowdfunding opportunities that exist. Creating a new idea is the easiest way to attract new investors, however, how do you reach those investors? Consider a Rule 506(c) exemption and your fund will be able to advertise publicly. In order to stay compliant with the SEC, the fund will need to only accept accredited investors.
If you are interested in accredited investors, crowdfunding, or any other financial concept or new, make sure to check out the VerifyInvestor.com Blog on a weekly basis.