Even though crowdfunding is a relatively old type of fundraising, the modern version of it dates back to 1997 when the British rock band Marillion invited their fans to chip in for their next tour. This successful campaign unlocked a new way of financing artists and entrepreneurs worldwide. Subsequently, platforms such as Indiegogo, Kickstarter, and GoFundMe followed.
This new round of fundraising also created a new breed of scam artists that took the idea of communities coming together for a good cause and flipped it for their nefarious needs. It is useful to run an Internet search on the company and its founders and check if any articles by reputable news portals cover their story. Did the company receive any awards, file patents, or get mentioned in research papers? Do they have a solid social media following already? A freshly made page is a sure red flag.
Alternatively, mediocre campaigns can put consumers off. For instance, an obvious lack of care while preparing the campaign should be a clear red flag that makes consumers steer clear of the campaign. The same could be said about the cohesion of the offer and the type of communication surrounding the campaign from start to finish.
There are some cases of concern, but this does not mean the public should stop supporting budding artists and entrepreneurs. Instead, according to analysts at Kilo Health, there are a few rules to steer clear of problematic campaigns.
Every company in the world had humble beginnings, and it became common knowledge in Silicon Valley that most huge companies, including Microsoft and Apple, started in one of the founder’s garages. Some companies switched their business model, as Amazon began as a tiny online bookstore.
But what all these companies have in common is that their founders either had a strong track record before they launched their successful model or they had the necessary skills to build one. Most entrepreneurs only secure their first investment after they have a solid prototype.
It is useful to ask the following questions before backing any project:
- Is it clear who the people and companies behind the project are?
- Is it the first time they have worked in this industry?
- Do they already have market traction and a product they could sell? In many cases, novice founders are very optimistic about their products but lack the need for more experience to plan their development properly.
Pulsetto creates a good example of a solid campaign. This company develops a neuromodulator device that stimulates the vagus nerve. This product helps the body enter the “rest and digest” mode, become calmer, feel better, and manage stress. The product is developed by a team of sleep experts led by sleep coach Vitalijus Majorovas.
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