What is Reward Crowdfunding?

Reward crowdfunding is a type of funding where several investors pool their money to finance a small business or entrepreneur, but instead of a donation they do expect a non-financial reward or return. Meaning, these investors are not looking to own shares of the company, make a monetary return on their investment, or buy in for decision making abilities.

How Reward Crowdfunding Works

Reward crowdfunding is obtained through approved crowdfunding platforms where non-monetary gifts are promised for tiered amounts of money invested. Once the funds are raised, the money is released to the business owner and the gifts are expected to be received.

How to Get Reward Crowdfunding

To get started with reward crowdfunding, businesses need to set up a pitch and reward system on an approved platform such as Kickstarter. Promotion on social media and word of mouth is beneficial as well.

Benefits of Reward Crowdfunding

Reward crowdfunding is beneficial to startups that do not have shares or ownership to offer. Reward crowdfunding is a way to obtain capital without taking on more debt.

Drawbacks of Reward Crowdfunding

Businesses may find it difficult to raise large amounts of money with reward crowdfunding because they are receiving multiple small investments. Additionally, if the business does not raise the goal amount, the money reverts back to the investors.