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Top 5 Tips for Pursuing Crowdfunding

By Deanne Katz, Esq. | Last updated on

Crowdfunding is the newest way to get a quick cash infusion, and potentially bring in more customers too. How can small business owners maximize its benefits?

It's not just a ploy for startups and small-time entrepreneurs who want to get a product to market. Thanks to the JOBS Act, crowdfunding can be used by any company to solicit donations or to find investors, a Forbes contributor writes.

This is all very new, and it can be hard to get a handle on which route to take. But if you keep these five tips in mind, you should be off to a good start:

  1. Consider what you're offering. There are two kinds of crowdfunding, donation and investment, and you need to choose the right one. If you're offering a product that customers can buy, the donation strategy might be best. But if the product is your company and you can afford to give up some ownership, go the investment route.

  2. Use it to gauge interest. Crowdfunding isn't just for when you're strapped for cash. You can also use the process to market your company to customers or investors and gauge their interest in new products.

  3. Hone your pitch. This is your chance to reach a new audience, so make sure to put your best foot forward. Write compelling copy or put together a cute video to tell others what you're all about.

  4. Offer a reward. If you go the investment route, then the reward is ownership of a piece of the company. But if you are seeking crowdfunded donations, offer some kind of reward to donors, whether it's a bumper sticker or a pre-release copy of a new product.

  5. Don't get in trouble. The laws about crowdfunding are relatively new so before you dive in, take some time to understand what you can and can't do. You can tackle the law yourself or get a lawyer who can break it down for you.

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