In past days, you had to be business-minded and creditworthy to convince total strangers to give you money. Now all you need is a efficient sales pitch and the right platform. The world of crowd funding are full off hundreds of websites claiming to promote new projects and find people willing to give their money to these schemes. Crowd funding provides promising deals which can tempt you to give money for example a limited edition T-shirt or a healthy discount on retails price.
You need to understand crowd funding clearly before you take any plunge money. You may not get anything for your money also as there are no guarantees, no substitute.
Don’t spend a dime until you read this first.
1. All crowd funding sites are not alike
Crowd funding platforms differ in significant ways. Some are specialized in personal projects while some are for nonprofits and charities or for small-business investors and so on. They make money in different ways by charging a monthly or an annual fee or rather by collecting a percentage of the money raised and/or transaction fees.
2. Their rules are different, too
Every platform has different rules. Some follow “all-or-nothing” rule. If suppose a campaign doesn’t make its funds, its owners walk away empty handed and the site collects makes nothing. Some campaigns don’t necessarily have to meet their goals to collect the cash, and the site still collects some percentage of any funds raised.
They also differ significantly in the amount of vetting they do before approving a campaign. Some require proof of identity, a working prototype, and a business plan. Others allow virtually anyone with a crackpot scheme onto their platforms and let the crowd sort it out.
3. Most campaigns are not successful
Crowd funding campaigns fail to meet their funding goals more often than they succeed. Some campaigns achieve their funding while some don’t. Another big difference is if a campaign fails to hit its goal, your contribution is returned. Whereas in few campaigns they choose a “fixed” or a “flexible” funding plan.
4. A lot of campaigns don’t really need the money
Sometimes a crowd funding campaign is just a handful of people with a dream. But many campaigns are such that they are backed by people who already have millions in the bank while others have people lined up to contribute well before the campaigns gets started.
5. Crowd funding is not shopping
The most important thing you need to know about crowd funding is that its not like buying something online no matter a campaign may look like an online shopping catalog.
You should keep one thing in mind that You are not buying a product but you’re funding a company.
6. Campaigns are obliged to keep their promises
If a campaign promises you a reward for contributing your funds , it’s required to fulfill your promises according to the terms of service on the leading platforms.
7. But not all of them do
Given their easy access to people with money to spend, crowd funding platforms are especially attractive to scammers.
There are well-intended campaigns that fail to deliver their promises due to inexperience or unforeseen circumstances.
8. Don’t count on getting your money back
If the campaign is a deliberate fraud its better to be off from it. If a platform detects a scam before contributions have been passed on to its owners, the site will typically suspend the campaign and refund the money.
If the platform fails to detect fraud and you’re victimized, you may be able to sue the campaign’s owners. If the fraudulent conduct is covered under an applicable state unfair trade practices law, you may be able to collect three times the amount you invested .
9. You might be able to hit ‘undo’
If you’re having second thoughts about a contribution, you may be able to cancel it, depending on the platform and your timing.
10. Do your research now or pay for it later
Most people who invest in crowd funding schemes get nothing back but the satisfaction of helping people to achieve their dreams or seeing something new and innovative come to life. There are no guarantees.