Kickstarter and other online fundraising websites are a great way for a new business idea to become a reality. However, it is not a cure-all for new or established business financial woes. If you are thinking of raising funds for your new business or even an existing business, you want to make sure you don’t fall into one of the many pitfalls associated with these crowdfunding sites.
Don’t Just Rely on Kickstarter
Kickstarter has been around since 2009 and while it is great for raising funds, it is not a guarantee. If you only rely on Kickstarter and ignore other financing options, you are essentially pigeonholing your new business. For example, if you are a veteran, you can qualify for a loan via the U.S. Small Business Administration.
Know the Rights of the Investor
Like all crowdfunding, a legal gray area is hard to identify with these online services. While you may have little in promises from Kickstarter, realize that any promises you give to investors for investing you must keep. Unlike real investing, Kickstarter users that are not given what they are promised can get a refund from Kickstart – and leave you without the money.
Kickstarter is Not There to Bail You Out
If the people that have invested in your company decide to sue you later because you cannot deliver on your promises, Kickstarter will not represent you. Also, by using Kickstarter, you agree to release them from all liability – so they will not be there with you in court if you are sued.
Kickstarter is Only a Jumping Block
If you have a successful Kickstarter campaign, do not stop. You need to move on to other financial options to help establish equity in your business – such as a crowdfunding for equity venture. You want to eventually attract accredited, real investors into your company so that you can continue to grow.
It’s Usually Not a One-Shot Thing
If you try Kickstarter, realize that it may not be successful the first time around. You are competing against other businesses and causes. If your marketing plan on the Kickstarter campaign isn’t adequate enough, then it may not attract an audience to your business. If your first attempt fails, do not be afraid to try it again.
Speak to an Attorney before You Use Crowdfunding
While you may think crowdfunding is the best option for your business, you may want to speak to a Miami business attorney. With the legal gray area, Campbell Law Group can help you decide which funding method is best for your business. Call us at 305-460-0145 today to get started.
Related Resources :
- 3 Ways Business Lawyers Can Protect Your Business
- Asset Protection for Small Business Owners
- 3 Reasons Every Business Needs an Attorney