When planning your crowdfund, determining what type of fundraise is the best fit for your company is an important first step. There are a few factors to take into consideration when making your decision.
A successful rewards raise is a great precursor for equity
Rewards raises are typically smaller dollar amounts than equity raises but require more backers due to low pledge thresholds. A successful rewards raise is fantastic proof of demand to entice investors during a subsequent equity crowdfund.
Consumer-facing companies can offer great rewards
The key to capturing pledges during a rewards crowdfund is to offer something compelling like a pre-order of a new product. It's a great fit for companies that have an established product or a set date that they will be able to produce and deliver their product.
A successful equity raise requires past traction
Investors aren't looking for a tangible reward (like a product pre-order) in exchange for their cash. Instead, they want to see a history of traction and success facts that points to a profitable exit in the future. It's important to establish credibility through your business plan, pitch deck, and financial documents to prove that your company is a great investment.