Crowdfunding is a great initiative that can help businesses and individuals. And it is also an exciting way for students to try out investments, support good causes, or favorite creators. At the same time, there are some sketchy people out there plotting their schemes.
Some craft feel-good stories, like a couple from New Jersey that paired with a homeless man to deceive people. Others do not mind lying about their relatives having cancer, like a woman from Iowa that was collecting money for her daughter with terminal cancer while her daughter was perfectly healthy all along.
It is crucial to avoid scammers and if you want to know how to do it, this article will guide you.
Always Start With Research
The secret to successful investment or charity is in research. For example, students would research everything about online academic writing platforms while looking for a credible essay service, before they buy college essays at EssayHub, which is fair. They want to know that they are paying for the best services and the result will be in time and of the highest quality. The same applies to crowdfunding. Start with research.
Read About the Platform
Several platforms offer such services, like GoFundMe, IndieGoGo, and Kickstarter. In general, all of them have very similar rules and guidelines, but it is better to know beforehand what you are signing up to. In some cases, if you fall into a scam, the platform will return you money, but they still take a commission for their services, so the sum won’t be full.
Also, read about how the funds are transferred. Usually, there is some transfer period when your money is stored on the platform before it is given to the creator. The more you know, the better. Read the comments and reviews, like you would do with writing service review websites to know more about specifics. Do not be afraid to ask creators any questions directly, the honest ones will gladly answer them.
Choose Crowdfunding Option
Overall, there are four types of crowdfunding one can participate in. The majority offers some benefits for your investment, but not all. Here are these types:
- Investment-based support. People give money to a company or startup for the project and get a share or a stake in the business.
- Loan-based support. People lend money for a set rate, it is called peer-to-peer lending for those who do not want or cannot go to a bank.
- Reward-based support. People fund a company or individual for a product in return. For example, someone wants to produce new headbands; you invest in them and get a product.
- Donation-based. In such cases, people donate to those in need as a charity. There is usually no benefit for you, it is just out of a desire to help those who struggle with health or finances.
As one can see, not all of these opportunities are equal in terms of benefit. If you are looking for investment options, it is one thing. But if you are willing to make a charitable donation, it is a completely different story.
Learn About the Creator and Campaign
When you find a campaign that you are interested in, look up the creator or business online. Are there any other campaigns in their name? How did they go? Were they involved in any scams before? Do they have a website or social media? Do they have an address and phone number? Do they use their real name?
Answering such questions helps to understand whether there is anything sketchy. If the company and their campaign is legit, it has to be clear and transparent about everything. They need to list why they need money, what for, when, and how they are planning to use it and reward investors.
How Realistic is the Project?
Even if a company or campaign is legit, it doesn’t mean that it is completely safe. One can lose money not only because of the scam, but because the company busted or was unable to produce what they wanted.
The next step is to critically read the listing and think of how realistic it is. Is it even possible to produce that specific thing? Just think about Theranos and their promises that never get to see the light.
Investment is always a risk so try to invest not more than 10% of your earnings. And give only the money you can lose just in case.
Do Not Make Decisions Based on Emotion
When it comes to donating for a good cause, it is hard to stay cold-hearted. It is only natural to want to provide help to those in need. But some people do not hesitate to lie for a scam. The rule is simple – get emotions out of the way. You do not need to be a genius or know everything about decentralized internet, AI, or space travel to see the holes in the story.
Read it carefully. Does it make sense? Is there any factual data? Can you ask a person for clarifications or some proof? If they are really in need, they will be happy to provide that.
If it is a charity donation, look up the organization, their registration as well as license.
In a case when people are asking for money after natural disasters, it is always better to donate to verified organizations directly than to individuals online. In such a case you know for sure that your money is going for help.
Crowdfunding is a great opportunity, but it requires some investigation to make sure your investment is safe. Always do due diligence and if you have at least some level of doubt, do not donate. If you come across a scam, report authorities, the platform, and warn other investors by commenting.