Crowdfunding is perhaps the newest trend related to raising capital. Various tools have been created that allow companies to put their request for funds out “to the people” in hopes of getting small donations (or investments) that may help fund the venture. While the individual investments in the case of crowdfunding are small, the theory is that the total pool of capital is larger, thus instead of having a few major investors bankroll your venture, a large pool of smaller investors will provide the necessary capital.
Try This: Make sure you offer attractive rewards to potential investors in a crowdfunding project. Since “investors” aren’t traditional investors, meaning they don’t actually own any equity, they’re simply donating to your project, make sure there is something of value you can give to participants as a reward. The reward may be as simple as a free pen or something as complex as naming rights for upcoming products.
Avoid This: Don’t assume that a crowdfunding site is a magical tool that will expose your venture to a huge audience of potential investors. You must actively promote your idea on the crowdfunding site and it often helps to go into the project with a pre-existing audience.