This is simply a pooled and network money made available through the internet to help support the entrepreneur’s effort start their dream business. What gave birth to the idea occurs for a variety of purposes, which includes , citizen journalism, disaster management, artists seeking support from fans, political campaign, creating free soft ware, funding a start-up company, funding a movie company, society research etc.
Majorly, there are two types of crowd funding. The first is a reward approach or donation where the donor gets either nothing in return or get a giveaway, a promise of an eventual reward and benefit on tickets to the show, product being made out etc. The second type of crowd funding has to do with investment, whereby an entrepreneur is able to raise up to at least $1 million in a 12 months period through the posting of a business plan and equity term sheet, but must add an audited financial statements if seeking more than $500,000 to kick-start a business, payable on an approved website platform. However, if you are an accredited investor, you can invest any amount, while the un-accredited investors are limited to between $2,000 and $100,000 in a 12 months period. These kind of investment approach is purely a provision of the United State of America JOBS Act that allows and create rooms for a wider pool of smaller investors with fewer restrictions or bottlenecks.
The approach or interventions for smaller investors has some short comings, namely, the lack of protection of intellectual property rights which exposes your contents to every body such that once posted, your work and idea is ripe for being copied or stolen by the public. If you have a company or companies whose competitive advantage is secured by trade secrets or strong patents, crowd funding may not be a good platform to use, so to say, but okay for business whose success depends on being first to market with an easily copied process or services online. They are online, but serious warning must be given here, so that you don’t fall into the hands of the bad guys, parading, or creating fake websites, and claiming to representing crowd funding.
Kickstarter is One of the reliable platform for now. Kickstarter is an American public-benefit corporation, and is based in Brooklyn, USA. It is referred to as a home of creative projects. They have recorded successes stories over the years. Although, there are pockets of cases, reviews and complaints of projects backed by sponsors that did not meet up the agreed quality or standard promised. So it is your duty to do your background check before you serve as backer to any project.
Amazon processes all the Kickstarter transactions. Once a project ends, all backers receives an email of notification.
Do a thorough research, and if you are not convinced, don’t invest or serve as a backer, because the certified websites does not guarantee the delivery on the promise. They are advised to provide more vibrant quality control mechanism so the websites administrator are now advised the sponsors of any project to use their own best of judgment before supporting it. They also warned project leaders that they could be liable for legal damages from sponsors for failure to deliver on promises made.
Ideally speaking, Crowd funding appears to work well for tangible products, where the investors hope to receive in the future, unlike intangible assets like cash or liquid.