Crowdfunding, the new Eldorado of investment?

As a reminder, reward-based crowdfunding allows contributors to support a project and to get in return a tangible item or service depending of the amount invested. But there are no guarantees that you will receive your reward or that the reward will correspond to its description. Here are some tips to follow if you want to avoid to be fooled by the glossy appearance of some crowdfunding sites or projects.

To like a project, you must understand it first. 

The majority of serious crowdfunding platforms give access to a lot of information helping you to make the good choice. Take the time to read carefully the project file and ask questions to the entrepreneur. Don’t hesitate to ask your relatives who know the business sector of the company.

Cases of fraud are not uncommon in the reward-based crowdfunding projects. The US Federal Trade Commission has recently taken legal action against a project creator of a board game. Instead of producing the board game, the project creator used most of the USD 122,000 raised for himself. 

The amounts allocated to reward-based crowdfunding projects are not very large, the average contribution is about EUR 50, but sometimes, the price requested for a reward can go up to several thousand of euros. All the more reason to be cautious and not to cut unnecessarily corners in your savings.    

In other words, crowdfunding is far from being the new Eldorado but is nevertheless not a mirage. Whatever type of crowdfunding it is (charity, reward, equity or lending), contributors invest with the heart and not with the head and impulsive investment can lead, sometimes but not always, to success.

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