What is reward based crowdfunding?

It is a joint effort by the creator; crowd; contributors; and backers. The creator asks the crowd to make a small contribution for his start-up through a crowdfunding platform. In return for the contribution, the project creator offers some reward. Since individual contributions are often small, the idea is for start-up owners to motivate as many people as possible to pitch in.

A jewellery designer might offer a handmade bracelet, a solar operated lawn mower could offer a free mow job, and some just send a thank you note. However, crowdfunding platforms charge 7% to 12% for the fund raised.

Have a look at some of the advantages and disadvantages of rewards-based crowdfunding before you leap:

Advantages:

 No collateral needed or credit check required.

 Hiring a financial or legal professional not required.

 The creator gains 100% ownership of the venture.

 Campaign exposure through the crowdfunding platform helps increase brand awareness.

Disadvantages:

 Not suitable for start-ups or SMEs needing investment beyond $100,000.

 If you don’t reach your funding goal, funds stand the chance to get forfeited.

How can you get reward based crowdfunding?

By applying on one of the many online crowdfunding platforms you can start a reward-based crowdfunding campaign. By making a convincing pitch and attractive reward that draws in as many people as possible and also by reaching out to family, friends, and associates through email and social media. Listed below are some of the best platforms for reward crowdfunding:

Kickstarter

Indiegogo

GoFundMe

Reward-based crowdfunding is perfect for creative start-ups with strong marketing skills requiring $100,000 or less. You have the added benefit of connecting with customers, launching a brand and receiving a valuable response for future research and development.