{"id":41,"date":"2018-09-10T11:00:49","date_gmt":"2018-09-10T11:00:49","guid":{"rendered":"https:\/\/epiksolution.org\/startup-company\/blog\/?p=41"},"modified":"2019-08-13T05:52:45","modified_gmt":"2019-08-13T05:52:45","slug":"what-is-rewards-based-crowdfunding","status":"publish","type":"post","link":"https:\/\/www.startupcompanycounsel.com\/blog\/what-is-rewards-based-crowdfunding\/","title":{"rendered":"What is Rewards-Based Crowdfunding?"},"content":{"rendered":"

Crowdfunding has become a very popular way to fund a new business enterprise, as owners do not have to pay back any of the funding. Many new businesses use sites such as Kickstarter<\/a><\/u>, \u00a0or AngelList<\/a> to get their companies up and running. Perhaps the most commonly used type of crowdfunding is called \u201crewards-based crowdfunding,\u201d in which entrepreneurs seek financial contributions in exchange for providing a service or product to donors. Often, the service or product is directly related to the new enterprise.<\/p>\n

For example, someone trying to launch a beauty products business may offer moisturizer or lipstick to anyone who donates at least $100. You can also offer rewards that are not directly related to your own product or service, such as offering a t-shirt with your logo to anyone who donates $50. The rewards and minimum donation amounts for rewards can be big or small, depending on your enterprise.<\/p>\n

This type of funding is beneficial for many types of companies that may not qualify for small business loans or other types of traditional funding. However, it is important that you can easily explain the concept of your business and its products to a large-scale crowdfunding audience. If your concept is too complicated or technical, it may not be as accessible to the public and people may not be drawn to contribute.<\/p>\n

Anyone is allowed to donate to a rewards-based crowdfunding campaign, including your family and friends, business partners, potential customers, or complete strangers.\u00a0 However, the U.S. Securities and Exchange Commission (SEC) determined that there are individual investor limits in any 12-month period. Additionally, the SEC also places a cap on the amount of money that may be offered through crowdfunding. \u00a0A campaign should be well-organized and publicized to reach as many people as possible, as individual contributions can be small. The more people you reach, the better, and social media can be a powerful tool for crowdfunding campaigns, especially because there is no cost to social media advertising.<\/p>\n

Is Rewards-Based Crowdfunding Right for You?<\/strong><\/p>\n

There are different potential benefits and drawbacks to rewards-based crowdfunding, depending on your situation. Some benefits can include:<\/p>\n