How to Research Gadget/Gizmo Crowdfunding Campaigns to Make a Wise Funding/Investment Decision
Regardless of whether you are researching a donation, equity, lending, perk or reward-based gadget/gizmo Crowdfunding campaign, the most important thing to do before you transfer any money to anyone is to ask the following questions, then study their answers carefully to make sure that this campaign is worth your time, effort and money.
It is important to note for the record that equity is not legal in the United States yet and will not be legal until the SEC issues their final Crowdfunding guidelines. Most experts expect guidelines for accredited investors to be issued first, followed by guidelines for 98% of America’s population, which fall into the unaccredited investor category.
Most premium Crowdfunding sites provide education, training or some type of online Crowdfunding University program to make sure that potential crowdfunders have a complete understanding of what to expect to receive in return for their money. Recommended courses include a review of the JOBS Act, investor types, due diligence, funding process, crowdfunder’s role, common stock, risk and returns, and diversifying a gadget/gizmo crowdfunding portfolio.
Do they have a well-written business case?
The Crowdfunding campaign’s case statement is an all-important vision document that spells out the major aspects of a gadget/gizmo crowdfunding project’s story, including the mission statement, the gadget/gizmo’s goals and objectives as well as the PR/marketing strategies will make fundraising effort success and continue into the formal market introduction of this particular gadget/gizmo.
Does their gadget/gizmo serve a real need in the community?
The easiest way to determine whether a gadget/gizmo solves a real market demand is to ask who the final decision maker is that makes the purchase decision to buy a product or service and why. How does the product/service save the buyer time, money, convenience, and how fast will the return-on-investment be? This should be an easy to answer question for business-to-business computer hardware crowdfunding campaigns, but sometimes business-to-consumer campaigns are centered around psycho-graphics such as being first, being cool or associating buyers with a certain buying segment of the population and the benefits as sometimes difficult to ascertain.
Regardless, if the entrepreneur or business cannot explain why their product is important to a given set of buyers in 2 minutes or less, then may not be a good candidate for your Crowdfunding dollars.
Have they determined the size of their market?
A favorite question for Angel investors and Venture Capitalists to ask when entrepreneurs and businesses are trying to raise seed money to start a business is how big is the business opportunity for this gadget or gizmo? What is the total universe that exists for the potential buyers of the gadget/gizmo product or service? This is great question to ask all computer crowdfunding campaigns. If there are 25 million small businesses that would save time, money or make their business more profitable, then this computer crowdfunding campaign might be worth it. If they do not know the answer to this question, then their computer hardware maybe a solution in search of a problem to solve, which is not good.
Can they quote facts and figures from industry research?
There are numerous industry analyst firms such as Current Analysis, Forrester Research, Frost & Sullivan, Gartner Group, IDC Research and the Yankee Group, which specialize in conducting industry research and writing research reports and studies that aim to qualify and quantify how much an industry is worth, who the leading players are in the field and what the trends and growth patterns are expected to drive the industry as an industry grows.
The only industry analyst research firm currently covering the nascent Crowdfunding industry is Massolutions. In addition, the Crowdfund Capital Advisors (CCA) also produces some good primary research on where the crowdfunding industry is headed.
Any entrepreneur or business worthy of a crowdfunding investment should be able to tell you how large their future customer base will be and how much revenue their gadget or gizmo might generate.
Do they have strong and seasoned management team?
A great place to start for executive management team research is Linkedin.com. Seasoned executives will have in-depth resumes combined with lots of recommendations from past business associates. It also easy to assess the number of industry contacts they have built as well as what industry working groups they belong to. Simple searches on Google and criminal background checks also will turn up negative background results very quickly.
Do they have a current, legal U.S.A.-issued passport?
Not a part of any industry group or SEC checklist, but if the federal government knows who they are, it will be much easier to verify their correct identity and track them should them should they make a bad business decision.
Is their Crowdfunding Site registered with the SEC, CFIRA, CAPS, CrowdCheck, etc. ?
1. Securities Exchange Commission (SEC) – After the SEC issues their final guidelines for Title II (accredited) and Title III ( unaccredited) crowdfund investing, all crowdfunding portals and intermediaries will have to register with the SEC.
2. Crowdfund Intermediary Regulatory Advocates (CFIRA) – CFIRA works with the Securities & Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), and other affected governmental and quasi-governmental entities to help establish industry standards and best practices.
3. Crowdfunding Accreditation for Platform Standards (CAPS) – Designed to protect both crowdfunders (people pledging or investing capital) and fundraisers (people raising capital), the CAPS program’s mission is to foster the sustainable growth of the crowdfunding industry to provide much needed capital for projects and initiatives, start-ups and small businesses.
4. CrowdCheck – This service verifies that both Crowdfunding portals as well as their Crowdfunding clients meet certain requirements such as background checks so that investors can make intelligent investment decisions by performing a lot of due diligence before investing.