Raise Money With Crowdfunding
Raise Money With Crowdfunding
Crowdfunding is a way of financing a project by pooling the donations / contributions/ purchases of many individuals. This has become an emerging method for inventors trying to raise money.
The New Law – for Investments
Today you can take in money but you must be very cautious about taking in money as an investment for small investors. Recently the CROWDFUND Act (officially titled “Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure Act), passed which will allow private companies to raise up to $1 million in any 12-month period by selling stock through authorized crowdfunding websites. But the rules for the authorized sites are still not implemented, so if you need to raise investment money you should keep an eye on the legislation till it is ready to be implemented.
Crowdfunding – Indie Birds
You post on one of the sites a video that talks about your invention in as intriguing way as possible and then you list how much money you are trying to raise and what you are offering. You can offer anything from a finished product once you have it made to a share of your business, royalties on sales or another offer that you may be considering.
Costs
4% – 6% if the inventor reaches his or her goal, sometimes more if they don’t, plus credit card processing fees of up to 4%. If you pursue crowdfunding as a method of raising money be careful to understand when you will get the money and what fees you may pay if you don’t raise enough money. For example you may have a goal of raising $25,000. If you only raise $20,000 some sites will return the money to investors and charge you a fee. Others will give you the money but charge a higher fee. And other sites may offer a different fee structure so be sure to completely understand the fee structure before moving forward.
Success Story
Isaiah Coberly invented a new cover for the iPad, which can be folded into a variety of configurations for use on a lap, desk, airplane tray and a host of other impromptu settings. While Coberly had some prototypes and people raved about the product, he didn’t have enough money to move forward. So he and his partner, Becca Iverson decided to try the online fundraising through Kickstart. They had as their initial goal $10,000 raised in 60 days and they hit that goal at 30 days and ended up raising over $20,000.
Crowdfunding – Indie Birds
People who invested online got a thank you note for less than $500, and for those who put in $500.00 they received a promise of a hand signed Flip Steady once the product was produced. Though not the final count, on May 13th the inventors had received money from 224 backers for a total of $23,242.00 for an average donation of just over $100.
Since raising the money Coberly had received an offer from an investor to buy 35% of the company and another offer from someone who wanted to buy the idea. Coberly thought both of those offers benefited the investors more than him and he turned them down. He wanted to keep control of the company and where it was going.