Crowdfunding – A method of raising capital through the collective effort of friends, family, customers, and individual investors.
Accredited investor – An individual whose net worth is greater than $1MM, or whose income exceeds $200k for the past 2 years. Currently the U.S. Securities & Exchange Commission (SEC) mandates that only accredited investors are legally able to invest in private companies. Donation-based crowdfunding – Any crowdfunding campaign in which there is no financial return to the investors or contributors. Rewards-based crowdfunding – Any crowdfunding campaign that involves individuals contributing to your business in exchange for a “reward,” typically a form of the product or service your company offers. Equity-based crowdfunding – Any crowdfunding campaign that allows contributors to become part-owners of your company by trading capital for equity shares. Social proof – The phenomenon where people follow the examples of others in an attempt to reflect the best course of action in a situation. In a crowdfunding campaign, your early backers generate your social proof—once early adopters vet and buy into your idea, others are more likely to follow suit JOBS Act – A bill signed into law by President Obama on April 5, 2012, aimed at encouraging startup and small business funding by easing key regulatory burdens surrounding fundraising. General Solicitation – Publicly advertising investment from the general public through traditional and emerging channels, including email marketing, public speaking events, social media campaigning, or creating a public profile on a crowdfunding site like Fundable. The 80-year ban on general solicitation was lifted on September 23, 2013 under Title II of the JOBS Act. Soft Launch – Getting the word out to your audience—friends, family, existing customers—about your upcoming crowdfunding campaign, usually at least a month before your actual launch. Using social media, email marketing, and word-of-mouth, this is an effective way to build awareness and make an initial pitch before actually asking for money |