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What’s next for crowdfunding? Four predictions for the future

Crowdfunding has changed considerably in the last two years alone, so what does the future hold for this form of funding?

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Crowdfunding continues to change

Once upon a time, crowdfunding was done by begging friends and family to invest in your company, then formalized online with sites like Kickstarter and Indiegogo where anyone can chip in smaller amounts to get you on your way. But with so many companies launched to help you crowdfund, and so many new strategies in a rapidly growing ecosystem, what does your company need to know about the future of crowdfunding?

To answer that very question, we tapped the expertise of Kaitlyn Houk is a crowdfunding Campaign Manager at RainFactory Inc., and uses platforms such as Indiegogo and Kickstarter to launch and run some of the most successful crowdfunding campaigns to date, most notably JIBO (the world’s first family robot which raised $2.29M), SKULLY AR-1 (the world’s smartest motorcycle helmet, $2.45M), Luna (the mattress cover to make any bed smart, $1.1M), and Snap Judgment (the NPR radio show that tells stories with a beat, $209k). Her expertise is marketing and fundraising, and Houk spends her days sitting side-by-side with entrepreneurs every day to advise and execute on crowdfunding campaign strategy, inciting thousands to bring each new product vision to life. She has a BA in Political Science and Economics from the University of Virginia.

In other words, she doesn’t bleed red or blue, she bleeds green.

“Crowdfunding platforms have both flattened and broadened the fundraising landscape,” Houk opined. “Anyone with an internet connection can tap into this great fabric for raising support and acquiring customers. Even though crowdfunding is an open door for both product inventors and supporting users, it still takes agility and skill to succeed in a campaign.”

Houk works daily with clients who are “makers” and tells us that the top advancement she’s seen of late is “how these inventors and innovators progress from blueprint to finished product is in taking ideas directly to the online community for validation. This gives them the ability to use community feedback to shape their products. The low barrier to entry, the speed and ease of communication, and the wide range of channels through which we can reach out to all contributors in a campaign, combine to form a tight feedback loop that campaigners can tap into to flesh out, fund, and adapt their product or idea.”

So what is the current state of crowdfunding? Houk offers her three-point overview below:

1. Power to the crowd

This tight communication loop empowers smaller groups who usually don’t have a voice within large companies to be able to demonstrate the potential success of an idea or product. Take our client, Jibo, for example: Jibo Robot, one of the highest-funded technology campaigns on Indiegogo, came out of some of the best and brightest researchers from the MIT Social Robotics Lab. They then took their product directly to the masses and quickly found the buzz-worthy demand they needed to move forward. Jibo could then take their tidy sum of 4,800 pre-orders and $2.3 Million raised and raise another $25.3 million in a Series A round to build their business.

2. Build it together

Early-stage crowdfunding means makers can tailor their product to meet demand. There’s a discovery process that goes on when companies decide to crowdfund. Customers ask tons and tons of questions; often questions that makers have never considered before. For instance, the creators behind the SKULLY AR-1 Motorcycle Helmet have spent a long time discussing the feature sets that they believed would add the most value for potential customers. After the launch of their campaign, and the communication loop tightened, they suddenly had a large pool of motorcycle enthusiasts wanting to know about more features. Backers have a direct line of communication to the maker of the product and real input on feature sets. The SKULLY team released videos, diagrams, and performed demonstrations of other possible features, and got very valuable feedback on which features to focus on.

3. Naked in public

Many of these products fail, and when they do, they fail in a very public way. Products that fail early in their crowdfunding campaigns walk away without any funding and a very bad scorch on their egos. It is even worse if they fail AFTER receiving funding, which is the specter that hangs over any successful campaign. Communication has sped up, but not in lockstep with fulfillment, or the speed to produce and ship products. There is a time crunch within the company itself to live up to its promises.

Every crowdfunding team wants to meet their goal to launch their product. But not every crowdfunded product is able to launch. Angry investors are one thing; angry customers are another. There are innumerable campaigns that don’t launch simply by self-selection: campaigners who are remotely timid about fulfillment sometimes back out or pivot their product before coming to the spotlight. One of our clients even told me, “If I’m opening the kimono, I better look ripped.”

So what’s next? Four predictions for the future

So what will be the next advancements? How will funding be innovated in the future? In her own words below, Houk offers four predictions every brand must pay attention to:

  1. Building Trust – More new digital marketing firms like RainFactory are entering the space to help campaigners hone their vision, and build confidence in the product as well as the ability of the team to bring the product to life. Customers and backers are needy: constant feedback, profuse thanks, and social validation are an imperative.
  2. Streamlined Operations – New services are cropping up to offer accessible and affordable fulfillment systems for crowdfunding campaigns, such as BackerKit. Even the crowdfunding platform Tilt has begun to offer fulfillment services. I wouldn’t be surprised if more platforms began to do the same.
  3. Vocal Backers – Backers will become more comfortable with this “buy and wait” model, as long as the crowdfunding community of trust is maintained. There are even backers who feel compelled to defend the product against critics. On the other side of the same coin, backers will have better “lie detectors” to call out any crowdfunding schemes that look suspicious and vocally demand more answers.
  4. Simplified Legalities – The legal system will catch up. The hybrid donate-presale model will reach a level of maturity and there will be mutually agreed-upon sets of terms and conditions for launching and running a crowdfunding campaign. Kickstarter and Indiegogo are the biggest requirement enforcers right now and they will continue to be the leaders in this arena. Their Trust and Safety teams are some of the best I’ve ever worked with.

Okay, so there is actually a fifth prediction:

  1. Fostering Growth & Imagination – The technologies that are being created via this direct-to-consumer method are truly awe-inspiring. I am excited each day I get to go to work and help these people make products that have a meaningful impact. More exciting technologies are developed, more dreams come true, and more jobs are created: one campaign at a time.

Houk concludes, “Case in point: Go fund somebody today and you’ll have an extra skip in your step. I promise.”

#Crowdfunding

The American Genius is news, insights, tools, and inspiration for business owners and professionals. AG condenses information on technology, business, social media, startups, economics and more, so you don’t have to.

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4 Comments

4 Comments

  1. PICISI.com

    June 8, 2015 at 5:20 pm

    Great article, Kaitlyn we are trying to launch our crowdfunding site at http://www.PICISI.com, however we need 4 more administrators to be able to do that, would you kindly refer some good people to us?

  2. Gitendra

    June 9, 2015 at 12:13 am

    Kaitlyn and her team do spectacular work – they don't just have deep understanding of the crowd funding model and its associated best practices, they also respect the entrepreneurial process. This means an immersive and comprehensive examination of specific and often unique client product development and growth needs. Blended together, these framework approaches make Kaitlyn and RainFactory a powerful and effective agency with an in-house feel.

  3. Pingback: What's next for crowdfunding? Four predictions ...

  4. Pingback: Which state leads crowdfunding efforts? Texas, duh - The American Genius

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Business Finance

Under-representation of women in fintech: Let’s talk about it

(BUSINESS FINANCE) Representation of women in fintech remains scarce despite a prevalent population of interest. Why is this the case, and what can we do about it?

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Woman reading a document in front of her computer, one of the women in fintech.

Women are 50% of the population – so why are there only 9 of us on the 2020 Forbes Fintech 50?

I’m personally shocked by how underrepresented women are in such a lucrative industry. By 2022, it’s predicted that fintech, or financial tech, will be worth $26.5 trillion, and we cannot afford to miss out.

And I’m serious when I say fintech is truly taking over. This includes payment processing, online and mobile banking, person-to-person payments (think Venmo or Cash App), financial software, to name a few. For some perspective, half of consumers use digital banking services as the primary way to manage their money. That’s a big deal.

So why does it matter that women are drastically underrepresented in leading roles at these companies?

  • Women CEOs receive only 2.7% of all VC funding – that is astonishingly low, considering that the remaining 97.3% is secured by their male counterparts.
  • While a study conducted by the Harvard Business Review on leadership skills found that women scored higher than men in 17 out of 19 categories (I could’ve told you that), women founders make up only 17% of fintech companies. Some of the categories tested on were:
    • Bold leadership
    • Taking initiative
    • Resilience
    • High integrity & honesty
    • Collaboration and teamwork (this is a big one!)
    • Inspiring & motivating others

If you’re a woman interested in business, tech, or entrepreneurship looking to break into the big leagues, here’s some exclusive advice from lady CEOs, founders, and COOs:

  • Stay Passionate
    Suneera Madhani, Founder + CEO of Fattmerchant, says: “…remember why you started and hold that close to your heart when times get tough.”
  • Be Open to Learning
    “Never behave as the smartest person in the room because you may miss some of the best ideas.” Says Snejina, Co-founder + CEO of Insurify.
  • Trust Your Intuition
    As the Founder + CEO of Tala, Shivani Siroya urges us to: “Stay excited, focused on results and be incredibly optimist. It’s okay to really believe in your gut – just make sure that you see the results with it.”

2021 is a new year full of opportunity – even though the odds are (and always have been) stacked against us, let’s have this be the year where women techies and business owners capitalize on their leadership skills. We have lost time – and profit – to account for.

Author’s Note: Thank you to CreditRepair for the linked infographic!

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Business Finance

Is the convenience of payment apps worth the risk of fraud?

(FINANCE) Peer-to-peer payment apps like CashApp and Venmo are quick and convenient – for users and scammers alike. What are Square and PayPal doing to help?

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CashApp open on phone one of payment apps susceptible to fraud.

More and more people are using peer-to-peer payment services, like Square’s Cash App and PayPal’s Venmo, to make purchases, handle their banking, or just to pitch in on the pizza you and your friends had delivered last night. These payment apps have been particularly useful for folks who may not be able to afford bank fees or have other barriers preventing them from accessing a bank account.

That’s because they are very easy to set up, requiring nothing more than an email address or phone number. Even folks with bank accounts are using these payment apps more as folks are trying to stay home and reduce their in-person contacts during the COVID-19 pandemic. The number of daily users on Venmo has grown 26% since last year.

While these apps bring a lot of convenience to our lives, they have also made running scams more convenient for cybercriminals. According to experts, the rate of fraud on Venmo and Cash App is three to four times higher than with credit or debit cards. While PayPal and Square don’t provide statistics about scams, there are some telling signs. The New York Times and Apptopia, a mobile services tracking firm, found that the number of users mentioning frauds or scams in Venmo customer reviews had increased by four times in the past year.

It seems that Cash App has the most fraudulent activity, with the Better Business Bureau reporting twice as many complaints about Cash App as Venmo, even though Venmo has more users. Zelle has a better track record when it comes to fraud, most likely because it requires a more thorough authentication process when setting up an account. It also has better legal protections for folks who have been scammed.

Some of the things that make these payment apps so quick and easy are exactly the reasons it’s so easy to scam users. The instantaneous payments mean that there’s not much of a vetting process, and not much time to catch a fraudulent transaction before it’s too late. Because you only need an email address or phone number to set up an account, it’s easy for criminals to set up dummy accounts for running scams.

Other scams have been facilitated by the marketing choices of the companies. For example, Cash App regularly runs a Cash App Friday promotion, in which users are rewarded for sharing their username, or $Cashtag, on social media. Unfortunately, this has essentially created a Rolodex of potential victims for criminals.

Square and PayPal are doing what they can to address the problem. Lena Anderson of Square says that they are “aware that there has been a recent rise in scammers trying to take advantage of customers using financial products, including Cash App. We’ve taken a number of proactive steps and made it our top priority.”

One “proactive step” Square has taken is to roll out a customer service phoneline, not only to make it faster and easier for customers to vet potentially fraudulent transactions or report scams, but also because scammers have been creating fake customer service phonelines to target users and collect their personal information. The phoneline is currently available to only some customers, but Square plans to scale it up to be available for all users over time.

Until these companies come up with more robust security systems, there are several things you can do to avoid scams. While you might get a cash bonus from Cash App, it’s probably not worth it to share your $Cashtag on social media. Only share your username with people you know. Never share your personal or banking information with strangers. Examine all transactions carefully. Some scammers are stealing money by making a payment request from an account that looks legitimate, but may have a slightly different spelling or one-letter change in the name.

No legitimate agents of these services should ever ask you for your sign-in code, or to download software, and you shouldn’t click on any links in messages promising cash prizes. Never send small payments in exchange for a promised reward – if it sounds too good to be true, it’s probably a scam. Don’t use digital payment apps to pay for or receive payment from sales on Craigslist, Offer Up, or Facebook Marketplace.

If you think you’ve been scammed, changed your PIN number immediately and contact the company and/or the FTC.

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Business Finance

Will your stimulus check be taxed? (and other burning questions)

(BUSINESS FINANCE) One of the biggest questions of 2020 (and potentially further) is whether or not your stimulus check will be taxed. Let’s take a look at this, and other questions.

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Couple looking at computer together to see how to use their stimulus check.

We’re finally able to put 2020 – and its unending laundry list of concerns, tragedies, and turmoil – behind us. At least, it’s a new year finally, but we’ll still be feeling some of the effects from a historically volatile time for a bit, and part of that includes one of the great certainties in life – filing taxes.

Arguably the biggest question that has been repeatedly asked is whether or not a stimulus check is taxed. This is against the greater backdrop of questions as well – does it affect (lower?) one’s tax refund, whether or not someone qualifies for the checks to begin with, when additional rounds might be deposited, whether or not anything changes when filling out tax forms, and so on.

So let’s break these down as simply as possible.

Are stimulus checks taxed?
In short, no (woohoo!). The tax code states that taxes are levied on “all income from whatever source derived” unless there is a specific exemption. While that makes it sound like a stimulus check would be taxed as a form of income given that it is not directly excluded, stimulus checks are considered an advance payment of a tax credit, and thus are not considered taxable income.

Does the stimulus check lower my tax refund?
Also no (hooray!). If anything, it will increase your tax refund. Essentially, this lowers the amount of taxes you are paying. There’s more to it than that, but this is the quickest summary.

Does anything change when filling out my taxes?
I’ll start by saying this is a bit of a trickier area, and I would absolutely suggest speaking with a CPA if you have any specific or in-depth questions.

When filling out the Form 1040, there will be a line on the second page for “Recovery Rebate Credit,” and this is where a number is entered under certain conditions. This is directly related to taxes filed in 2018 and/or 2019, as these years were used to determine who gets a stimulus check and the amount. The general rule is that if there was a big change between those years – losing a job, having a child, starting a new career, graduated college, etc. – then this line may need to be filled in. Essentially, if you are/were entitled to more stimulus payout, then you would enter in the difference here.

For example, if your taxes from 2018 were used to determine your stimulus amount, and this resulted in a low payout due to a high income for that year, but then you lost your job in 2019, you’d write in the difference here. So if you received $100 in stimulus but were laid off in 2019, you could still be owed $1100 (going by the first stimulus check that was valued at $1200 for an individual). You’d enter that amount on this line, which would then lower your tax bill and potentially (should) lead to a higher refund.

Essentially, this line is where you’re stating that you are still owed additional funds that the stimulus was designed to pay out. The IRS website goes over this in some detail, where it explains that individuals who did not receive the full amount via stimulus checks (called “Economic Impact Payments”) from the CARES Act should fill this line out.

In short, if you did get the full amount? Ignore this line. If you did not, you may be eligible, and should determine what to fill in so that you maximize a potential refund.

Will I get the second stimulus check?
President Trump did sign a COVID relief bill recently that was designed to give $600 checks to individuals, as well as other stimulus benefits for unemployment and various funding programs. However, not everyone is eligible for this second check. This includes high earners (anyone with an adjusted gross incoming of $87,000 or more), dependents, and persons who lack certain legal documents/designations.

If I qualify, when do I get the second stimulus check?
Some people have already received this payment via direct deposit, and these will continue onward for the next few weeks. The IRS cannot send any checks for this second round past January 15th, 2021. If an eligible person does not receive the payment by then, they can utilize the “Recovery Rebate Credit” mentioned above when filing taxes.

It should also be noted that some individuals could receive their stimulus via debit cards, so be sure to always check your mail carefully! There’s no indication this could happen with the second round yet, but it’s always best to keep in mind.

Is the tax deadline still April 15th, 2021?
At this time, this is still the official date that taxes must be filed. It should be noted that the same deadline was originally in place for 2020, but was pushed back once pandemic-related obstacles arrived. As such, there is a chance that the date could change for 2021, but until an official ruling is given, plan on having taxes filed by the standard April 15th date (or filing for an extension if that is a possibility).

Will additional stimulus checks arrive in 2021?
While there has been talk within the government regarding additional rounds, and while many are hopeful for a $2000 check, there is no official word or regulations in place to ensure that this will happen. It is still uncertain what the incoming administration will do, can do, or be able to pass in the future; to speculate would be ill-advised at this time.

Keep in mind that debates on the second stimulus check had been ongoing since July 2020 and were only recently passed; this would suggest that additional rounds could face similar discussion.

Summary
So, the good news here is that stimulus checks are not taxed and will not affect your tax refund, and this should help a large number of the populace as we continue to work through these difficult times. There is a chance that additional payments will arrive in the future, but keep in mind that they may not arrive soon. Lastly, as I previously mentioned, know that there is a chance to file for the rebate directly on your tax forms, and that I strongly encourage you to speak with a CPA if you have any questions.

Otherwise, as sincerely as I can say this, good luck in the new year!

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