crowdrise.com), where you can raise money for a
cause. Before joining a site, make sure you know
what you’re signing up for. If you’re launching a
campaign, make sure that the platform will serve
your funding needs.
Before you launch
Launching a successful crowdfunding campaign takes a lot of preparation. Consult and retain
legal counsel before launching a campaign in order
to know your legal duties and make sure that you
are complying with them. Although obtaining legal
counsel comes with a price, it can help identify,
address and prevent potential problems.
Make sure you are aware of possible federal and
state tax consequences before launching. Getting hit
with a surprising tax bill is no fun and could a;ect
your ability to successfully achieve completion.
When describing your product or business, make
sure that your disclosures are accurate, clear and
truthful and that your o;ers are explicitly detailed.
Most important, make sure that you are able to
deliver on your promises. Failure to put forth su;-cient e;ort could result in liability. Create a plan to
maintain clear ;nancial records so that every penny
raised is tracked. Make sure you have receipts and
detailed records of payments and withdrawals.
Be aware of fraud
;ere are concerns that fraudulent behavior will
increase as crowdfunding gains mainstream
momentum. Be aware of the possibilities that:
• A campaign may be accepting or soliciting money
by deliberately misleading you about the nature of a
product or its expected outcomes.
• A backer could commit to funding a business or
project and receive rewards, only to cancel or reverse
the funding transaction later on.
• A campaign creator could completely disappear
with your money and never produce a product.
Legitimate crowdfunding sites have safeguards
in place to protect users from fraud. ;e public
nature and transparency of these platforms can
derail attempts at fraud. Reportedly, crowdfunding
sites are working to foster further education and
protective measures for users. C
David Horowitz is
a leading consumer
Horowitz is the
CEO of Fight Back!
and co-founder of
Email David and
Amanda at info@
Fight Back TIPS FROM
Have a question for Fight Back?
Just log on to
www.fightback.com or email
firstname.lastname@example.org. Questions and answers of the greatest
interest to Costco members will be used in this column (with the permission of the contributor) and
will be posted on
www.fightback.com. © 2014 AMANDA HOROWITZ MEDIA, LLC ALL RIGHTS RESERVED
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consult with your own licensed
professional. We do not assume
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the interpretation, application
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Investing in crowd-funded startups
IF YOU’RE considering a
here is a short checklist
of things you should do
• Evaluate the investment.
Do you believe in the company or product? Are you
aligned with the overall short-and long-term business vision
and plan? Is it an opportunity
you feel is worth your investment? Why?
• Experience the company.
Visit headquarters. Speak
with a representative. Get a
clear picture of professionalism and company culture.
• Check licenses and registrations. The business should
have licenses from the city,
county and state agencies.
• Find out about litigation.
Search online for lawsuits and
bankruptcy filings, the company’s current and past names,
its affiliated corporate names
and the names of its principals. You can retrieve court
• Read financial statements.
Ask for corporate tax returns.
• Understand the future of
your investment. Check how
much the company is hoping
to raise, the terms of the sale,
how the securities are being
valued and how future transactions or offerings may affect
or dilute your investment. C
CROWDFUNDING ONLINE IS a popular way for
entrepreneurs to raise money for projects and companies. It can be a way to make dreams come true,
start a new business or raise money for a cause.
Whether you’re thinking of investing in a project or
launching one, here are some points to consider
before getting involved.
How it works
During an online crowdfunding campaign,
money is contributed by a number of individuals or
investors in order to support the ;nancing of a project or company. ;ere are di;erent types of crowdfunding—the types of crowdfunding this article
focuses on are reward-based and investment-based.
In reward-based crowdfunding, supporters get a
reward in exchange for their contributions. Rewards
vary and can range from a thank-you tweet to a preordered product to a role in a TV or ;lm project.
In investment-based crowdfunding, accredited
investors who fund a business have a potential for
;nancial return or ownership stake in the company.
Since crowdfunding is relatively new, the laws
governing it are still taking shape. ;e Securities
and Exchange Commission is hammering out the
details of the Jumpstart Our Businesses Startups
(JOBS) Act, which gives small businesses and startups greater access to capital.
New crowdfunding websites are launching
every day. Among the different platforms are
www.kickstarter.com), where creative
projects raise reward-based funding; Indiegogo
www.indiegogo.com), where entrepreneurial, cause-related and creative projects raise reward-based
funds; Crowdfunder (
which connects entrepreneurs and investors for
investment crowdfunding; and Crowdrise (www.