Crowdfunding is the new way to engage your altruistic personality or your entrepreneurial instincts. It doesn’t matter if you are altruistic or entrepreneurial, there are multiple things that you need to consider when backing a crowdfunding project.
There are many dilemmas a backer might have. For example, he could be confused about which project to back. Even after a backer zeroes in on a project, he needs to evaluate that particular project and understand the risk associated with it. All these dilemmas lead to one simple question, “How can backers decrease the risk of backing crowdfunding projects?” In this article, we will answer the question. So, without further delay, let’s get started.
1. Understand the real goal behind the product
Every project or product has a goal associated with it. It can be as simple as “raising funds to ensure proper education for underprivileged kids” or “a simple goal of collecting premium tutorial project ideas.” As a backer, you need to dig deep and understand their goal. If their goal resonates well with you, you are on the right path of backing a crowdfunding project.
2. Know the creators behind the product/project
The creators play a major role in the success of the project. You can find many companies that have been successful on multiple occasions in the past. These companies have created a reputation for themselves on crowdfunding platforms and hence are more likely to reach their goal. As a backer, there is no doubt that you should pick companies with a solid background and back their project.
You also need to do some background checks on the project creators. Questions, such as, “What have they done in the past? Or how many times have they failed in their endeavors ?”, Should be asked. A good-looking professional Linkedin profile can also give you hints on the creator’s background and philosophy. Below is an excellent example of a successful creator’s profile, creative aspect
3. Benefits of backing a project
The next thing that you should consider is the benefits for backing a project. Each crowdfunding project comes with perks (also known as benefits). Rational backers are more likely to look out for the perks and then decide on whether to back a project or not. If you are an altruistic backer, then the perks act as a bonus and are not necessary for your decision-making process.
4. Look how the project has evolved
Every project has a history associated with it. If you really want to make sure that you back only the best, check how the project has evolved over time. Not all projects have a past as they are fresh ideas and need funding to be properly executed. In that case, checking creator backgrounds can really help you understand the risk associated with backing a project using innovative idea(s).
5. Try to understand their business plan
A business plan lays out every major step that a project will take in the future. If you are a business-oriented person and understand the intricacies of business growth, try to get your hands on the business plan. This can surely help you decide and rationalize your decision-making process.
6. Lookout for a working prototype
A working prototype means two things; firstly, the project idea is not vague and has proper implementation; secondly, the campaign is going in the right direction. If a campaign has a working prototype or platform, then you as a backer should back the project (only if it meets your other requirements).It should also be noted that not all campaigns have a working project at the start. Many campaigns add a working prototype during the campaign and others after the campaign is completely funded.
7. Press coverage so far
Press coverage of a campaign can mean multiple things as well. Firstly, it means that the entrepreneur has the confidence in his campaign and is ready to tell the world about it. Secondly, it means that the journalist fraternity believes in the project and have evaluated it concerning the industry standards. As a backer, check out the press coverage and try to understand the opinions about the project by journalists and analysts.
The importance of crowdfunding stretches far beyond a company’s goal. It enriches the entrepreneurial thirst for many talented entrepreneurs and also ensures that we grow as a society. As a backer, it is your duty to understand the risk and then evaluate your decisions so that you can find the best crowdfunding project to pledge.
So, what do you look for in a crowdfunding project? Comment below and let us know.