Crowdfunding allows creators to raise funds for developing a new product or invention in small amounts from a large number of contributors. Starting contributions may be as low as $1. Organizers usually offer something in exchange for your contribution. It could be a thank-you in the credits of a movie, early access to the product or a special discount or even some type of profit-sharing once a product begins to earn money.
Many crowdfunding campaigns are perfectly legitimate. But wherever there’s money to be made, scammers can show up. They are perfectly willing to lie about the project and what types of rewards you’ll get.
The federal government has published some handy guidelines to consider when you see a crowdfunding opportunity.
- Who created the campaign? Find the name of the organizer on the crowdfunding page and do your own vetting. If you can’t find anything about that person, or the details don’t match what they’re telling you, that’s a sign of a scam. Search for the name of the organizer and project with the words “complaint,” “review,” or “scam” to see if anyone has already had a negative experience.
- What’s the purpose of the campaign? Be clear what the funds are for and what you should expect from your contribution. Not all campaigns promise you’ll get anything in return.
- What happens if the project doesn’t get off the ground? There’s no guarantee that the project will be successful and completed. Find out what happens to your money if the project doesn’t get going. Can you expect a refund? How you will get it?