Imagine you're an innovator with a big idea but not a lot of cash to bring the idea to fruition. You spend some of your own money up front to design a cool demo, and then you've got to figure out a way to come up with the rest.
Enter crowdfunding. It's a way for companies and individual entrepreneurs alike to raise money for their project with small investments from individuals. The creators receive the much-needed cash for development and the investors are hoping for a little piece of the action, possibly in the form of a super-cool product for substantially lower cost than retail price.
The idea of participating in a campaign can be tantalizing. You get in on the ground floor and possibly get a super cool product for way below what it will eventually retail for. But there is definitely a buyer beware aspect to this sort of investment.
Many people think of their “pledge” as a purchase of the finished product — not so. This can lead to frustration with (inevitable) production delays and anger when a product or idea fails to make it to fruition. The money you give to a crowdfund campaign does not give you any ownership in the company creating the product or in the finished item. You won’t get your money back if the project fails. It’s important that you see it as a donation toward the development of something you’d like to see made, with the potential of getting one should it ever make it to market. Read more below.