What Are Rewards in Crowdfunding?

Rewards based crowdfunding asks your supporters to donate to a project in exchange for rewards that are tangible and not money related (such as equity or ownership of a part of a company).

Some rewards that you might get include getting your name on the company’s website as a shout out, being credited in the credit reel of a video game, album liner notes, or end of a movie. You also might get some cool swag like a handwritten note, hat, tee shirt or can koozie. In some instances, you even get the actual product itself which is a pretty cool incentive.

This helps entrepreneurs or creative project leaders to pre-sell a service or creation as a means of launching a business, or gauging interest in their particular product or service offerings. The best part is these entrepreneurs can do it all without incurring a huge amount of debt or giving up their equity in the company for funding to start it. 

In some cases, the pledges are donations and no products go out for delivery. This is generally accepted for campaigns that are designed for help and help alone, e.g. medical bill donations or church related campaigns. But when it comes to a creative venture, it behooves you to offer your backers some sort of reward. 

It definitely doesn’t have to be expensive; even a gift of your time like a personal phone call or email can be enough to make your supporters smile. 

What Are Some Key Features of Rewards Based Crowdfunding? 

  • You do not have to repay the funds given to your specific project. You can just deliver the goods or services as you originally promised. 
  • The orders are made and secured before you launch your new product. The crowdfunding campaign will allow you to build your customer base as your funds are raised. 
  • You MUST deliver on your promises and stick to a schedule so as to be kind to your backers and run your business well. 
  • This is big with startups and entrepreneurs because it provides a method by which you can raise funds to launch new companies and products with minimal risk. 
  • This is great for products and services that are guaranteed to attract customer attention or are very innovative. 
  • It is NOT ideal for complicated concepts or products that the general public would not really appreciate or understand. 

When Did This Become A Thing? 

The idea of crowdfunding has been around for over 20 years as a matter of fact! In the year 1997, the crowdfunding site Artistshare hosted the UK rock group Marillion, and it was through this method they were able to finance their reunion tour. The fans got the reunion tour they wanted, and the group got the band back together. Although we do not know if any rewards were offered, this is one of the early crowdfunding examples, according to business blog TheBalances. 

What Exactly Is Rewards Based Crowdfunding? 

Sometimes called seed crowdfunding, this small business financing is a way in which entrepreneurs get financial donations from regular individuals like you and me in return for a service or item they find interesting or useful. This method is definitely popular as according to NerdWallet, there are 19 times more rewards-based crowdfunding campaigns as there are equity based crowdfunding campaigns. 

Business owners come up with their project or idea and a fundraising goal on a platform of their choice. In return for these donations, the businesses provide rewards to their backers. For instance, a startup who seeks to provide custom balloons might provide you a few custom balloons for free. 

Or, a startup offering bath and beauty products might create a custom one of a kind bath bombs that only YOU as a backer can get. A photography startup might offer to edit a photo for you in return for a donation. You get the idea. Sometimes, the rewards can be just as small as a handwritten thank you note, a Skype call, a phone call with a good message, or anything in between. 

Best of all, anybody can contribute to the funding campaign. It can be a friend, family member or even a business partner. The donations are usually rather small. So, it is on the campaign manager to promote the campaign and get the word out to solicit many donations. 

Are There Costs Associated with This? 

Absolutely. Some platforms usually charge a percentage that ranges anywhere from 5 percent to 13% of all the funds you raise. And you might also incur some additional processing fees as well. It’s best to research all your options. You can even choose a crowdfunding site that has built in backers to help you along. Also, you can avoid a platform fee. 

How Crowdfunding Bum Does It!

The best way to get backers is to make sure they can rest easy knowing they get their rewards. Or at the worst case scenario, their money-back that they donated. 

For CrowdfundingBum, 70% of all donations are withheld until rewards have been shipped and the backers got their perks. The backers will be happy knowing that they got exactly what they asked for. Or at least get 70% of their donation back. Happy trusting backers mean more donations for the campaigner.

The best thing to do is get your idea out there and onto a website that will serve you the very best in terms of budget. Get yourself somebody to write you a pitch that draws in visitors (or have the experts at CrowdfundingBum do it for you). And, make it filled with rewards at all donation levels. Remember, these need not be expensive or time consuming.

Final thoughts.

We hope you stick around a while to find out more about all that Crowdfunding Bum has to offer. You will find ample reasons to choose us as your funding source.

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