There has been much written about the need to get started with equity-based crowdfunding because otherwise the necessary deal flow will be noticeably absent when the SEC promulgates the rules. 100% Agreed.
However, whether it is a Kickstarter or Indiegogo rewards based campaign or preparing your company for equity crowdfunding using one of the new deal flow portals such as Crowdfunding Hatchery, we recommend “Safe Crowdfundingâ€. In fact, our message is to practice safe financing or even safe startups.
Traklight’s 5 Steps to Safe & Successful Crowdfunding
1. Identify your ideas and all the associated Intellectual Property (IP)
2. Protect your IP before you crowdfund
3. Pick your Platform
4. Raise Social Capital
5. Create your Campaign
If you read the first two steps and thought “that does not apply to meâ€, you are incorrect. 100% of companies have IP but that does not automatically translate into expensive patent protection. And in some cases, you may not have to file or register any IP; it may be more about protecting your IP with contracts. You may need help from a business attorney or online document provider.
With any type of crowdfunding your idea are out there in public for everyone to see and potentially copy. Also there may be implications for your future patent protection if you show everyone too much or offer the item for sale. So the key is to identify and protect BEFORE you launch your campaign.
Picking the platform the next and the right one depends on your objectives. Kickstarter is all or nothing, therefore if you do not hit the campaign target, you do not get anything. On the other hand Indiegogo has options that include paying a higher fee in order to receive the funds from your campaign even if you did not make the target. Be mindful of whether you can still fulfill your rewards with less than 100% of your goal. Ensure you do the research for the best fit.
Raising social capital is critical. Without a crowd, there is no crowdfunding. A strategy is to create content or become an expert in a field or thought leader. That credibility and validation allows you to draw in the social followers that are necessary to fund your campaign. It’s quality not quantity.
The final step is creating the campaign. If you just build it, they will not come. An additional tip related to Intellectual Property is that during the creation of the video or promotional part of your campaign, look for copyright and permission to use notices on the songs, pictures, or any items created by others. Read those notices carefully before you incorporate the items into your campaign to avoid infringement.
More information and resources on Practicing Safe Crowdfunding is available at traklight.com. Best of Luck and be careful out there!