Webinar: Raising Capital through Crowdfunding Sites (FREE)
If you missed the webinar on July 9th, you can view it here:
The questions and answers from the webinar are listed below:
Are the funds taxable?
Funds raised from crowdfunding donation/reward sites are considered taxable income. You’ll need to check with your accountant on the tax treatment.
What is the average campaign timeframe?
The average is 60 days. Most campaigns are 30, 60, 90, or 120 days long.
I want to raise $500K through donations. Is that possible?
Yes. There are examples of entrepreneurs who raised that much and more. Paul Trowe of Replay Games raised over $690K by preselling his product.
Do you have comparative statistics for Rockethub, IndieGoGo, and Kickstarter?
Not at this time, but we are gathering that data.
What is the risk of my idea being stolen by posting it on a crowdfunding site?
It’s the same risk any entrepreneur faces with an idea. Once out there in the market, it’s available for everyone to see. One way to mitigate the risk to focus on the benefits of what your product/service does without going too much into the details on how it works.
How would one position a perk for a service rather than a product?
It’s mostly the same between a service and a product. You can offer discounts on the service. You can offer a free version of the service to those who donate a high enough amount, etc.
When you set your target is that net of fees?
Yes. You need to set your fund raise high enough to cover the fees which will be taken out of the funds raised.
Do you need a corporate structure to crowdfund from donation sites?
Currently no, but the rules could change in the near future.
What type of deals do best on crowdfunding sites?
Those that are easily understood in a short amount of time. Your pitch video is only a few minutes. If your deal is more complicated than that it will be difficult to generate interest.
How does it work when you presell a product through a crowdfunding site?
The donor receives the option to buy the product (when it becomes available) for a discount.
Can crowdpitching be limited to certain states?
No you cannot limit crowdpitching to a certain location but you can design the rewards so it incentives a certain audience to participate.
What happens if you complete the project for less funds than raised?
You keep those funds.
If you know you will need more funding in the future after your crowdfunding campaign, how will VCs and angels view your crowdfunding effort?
Most VCs and angels will look at the crowdfunding raise for market validation.
When you set a target amount can you give a range?
No you have to set a specific amount.
Have you seen any exampes where the entrepreneur receives a convertible note instead of equity?
When you setup your crowdfunding campaign you determine the deal structure
Can you pick and choose your investor/donors?
No. Investors/donors can join without your approval.
Can you pursue additional sources of funding while crowdfunding?
Does each project have one shot or can you stop and restart?
No. You have one shot. You can always start another campaign later.
Are over funded deals capped?
Most sites allow you to extend the campaign if you reach your target.
The JOBS act starts Jan 2013 to take on unaccredited investors. What can be done till then?
You can pursue crowdfunding sites that cater to accredited investors.
Are there any examples that have raised VC funds after crowdfunding?
I don’t know of any specific examples, but I’m sure that the Pebble project (the IPhone watch) team will have no problem raising follow on funding.
What deal structures do investment sites normally use?
Equity is preferred rather than convertible notes.