Kickstarter and Indiegogo present several different types of innovative products and projects to invest in for crowdfunding. Some offer great potential and end up becoming a successful investment choice. Others, however, seem appealing at first, but end up resulting as failures. This leaves investors without money and no rewards. So, how do you prevent this? When is the right time to jump on board in a crowdfunding campaign and how can you guarantee that you won’t fall at the first hurdle?
Before spending your money on crowdfunding, there are several factors to consider that might eliminate the risks that come with this activity. According to experts from the National Association of Consumer Advocates and the Consumer Federation of America, keen investors must do their due diligence when assessing a crowdfunding campaign…
- Big Promises, Bad Deliveries
A device that controls your dreams (Luci)? A pair of glasses that allow you to record your daily life (ZionEyez)? How about a machine that lets you roast and grind your own coffee beans (Bonaverde Coffee)? These are just a few of the too good to be true crowdfunding projects that failed miserably. When a company makes big promises that sound revolutionary, beware. There are hundreds of products that come across as great investments at first but turn out to be bad deliveries in the long run. Sometimes, they’re scams, but other times they’re just being led by incapable project creators. As a potential backer for a campaign, it’s important to question whether the product or project is attainable before diving in.
- The People Behind the Scenes
You don’t want to invest your money in something that isn’t being led by a capable team. You want experts and specialists working behind the scenes to support and lead the product in question. There have been many failed projects where the creators behind it were actually at fault. These people end up realising that they’ve lacked the skills and expertise to pull through the project and reach their goals. The Kreyos smartwatch for example, raised $1.5 million during its crowdfunding event. This gesture-controlled and waterproof watch which was priced at $150 eventually hit rock bottom. Why? Because Steve Tan, the project’s chief campaigner realised that he, along with the launch team didn’t have marketers with enough technical knowledge. Moral of the story is, do your research of those behind the scenes and question – are they experienced and skilled marketers, techies and engineers? Can they carry this campaign through? Are you looking at a truly revolutionary, long-lasting product?
- What Does the Business Plan Look Like?
It isn’t just the team that makes a crowdfunding campaign successful – it’s the business plan, too. Of course, the competences of the project creators will determine the feasibility of the business plan. So, once you’ve determined that the people behind the scenes are somewhat proficient, it’s time to investigate the actual plan. Does it describe the project and idea in detail? Is the business value and mission statement communicated? There are several crucial features of a business plan to look out for that will help a backer make a better-informed decision.
To sum up, although particular measures need to be taken before deciding to invest in a crowdfunding campaign, it’s safe to say that this activity has great potential, especially when investing in something worthwhile. Crowdfunding offers many investment opportunities. For example, it allows you to invest in various small investments, so if one start-up tends to fail, there are others to resort to. Alongside diversifying your portfolio, crowdfunding also benefits in the sense that it offers higher returns than investing in bonds or stocks, for instance. The amount invested can be little. Finally, crowdfunding projects usually offer a reward as part of their pitch, so investors also ‘profit’ with ‘freebies’ like products, discounts, or vouchers.