When a startup chooses to raise funding through equity crowdfunding, they have the option to offer additional perks as a “thank you” for investing. Perks can come in various forms, whether a tangible perk offered by a main street business or intangible perks offered by software startups. In this blog, we’ll discuss the types of perks a startup can offer, the benefits and limitations of offering perks, and choosing crowdfunding perks that may be right for your startup.

Choosing Crowdfunding Perks

Main Street Brewery Example

Startups raising through equity crowdfunding are not required to offer perks, but perks are meant to be viewed as a “thank you” for investing.

For example, consider a local brewery that wants to raise $100k to expand the square footage of its taproom and engage its customers to come alongside in its expansion efforts. Before its campaign started, the brewery decided it wanted to provide an additional “thank you” to its new investors.

Perk Tiers

A startup may choose to structure their perks by varying tiers based on how much money an individual invests in the campaign. For the brewery example, let’s look at what some sample perk tiers may have looked like:

Tier 1 – Invest $100+ and receive: brewery branded t-shirt and pint glass

Tier 2 – Invest $200+ and receive: $50 gift card plus all Tier 1 perks

Tier 3 – Invest $300+ and receive: $100 gift card plus all Tier 1 perks

Tier 4 – Invest $500+ and receive: first access to new taproom post renovations, $100 gift card, plus all Tier 1 perks

Tier 5 – Invest $1000+ and receive: one-on-one strategic call with the founder, first access to new taproom post renovations, $200 gift card, plus all Tier 1 perks

Tier 6 – Invest $2000+ and receive: private party for 6 in the new taproom, first access to new taproom post renovations, one-on-one strategic call with the founder, $200 gift card, plus all Tier 1 perks

The brewery structured its tiers in a way that the more an investor invests, the more perks they receive in a way that accumulates all preceding perks at higher tiers. Investors receive these perks in addition to the direct investment in the company.

Selecting the Right Perks

It can be important to choose the right perks that fit your business model, financial margins, and are able to be closely managed and fulfilled at the conclusion of the crowdfunding raise. Startups may want to take all these factors into consideration when choosing which perks to offer.

Tangible vs Intangible Perks

Tangible Perks

The example from this blog includes primarily tangible perks which could be better suited for a main street business or a startup that sells a consumer product. Tangible perks may be more obvious examples because they generally align with the business model of a main street business/consumer product startup. It is important for startups to consider what is being offered at each investment perk. Considering profit margins on products, production timelines, and the ease with which perks can be fulfilled can help guide perk decision making.

However, for software startups or those that offer business-to-business (B2B) products and services where their investors may never become a customer, what could those perks look like?

Intangible Perks

Intangible perks may be better suited for startups that either do not offer a physical product or their target customers are businesses, hospitals, and organizations which may not be directly investing in the company. An intangible perk from the brewery example would be a one-on-one strategic founder call. Perhaps an investor knows of potential partner or mentorship connections or directly has experience in the industry that they can share with the founder in a one-on-one call. Maybe the investor has specific questions, wants the undivided attention of the founder, and wouldn’t be satisfied with a town hall style investor panel with many other investors.

Investment-based Perks

Investment-based perks are also an option for startups that can’t provide tangible perks. Offering a discounted price per share or valuation cap for the first number of investors or those that invest before a certain date could be a good alternative instead of tangible perks.

Not Offering Perks

A startup raising under equity crowdfunding might not find that perks would be relevant to offer or easy to fulfill. Perks are not a required part of equity crowdfunding but can be viewed as a “bonus” to direct investment in the company. It is perfectly acceptable to not offer any perks with your crowdfunding campaign if they don’t make sense for your startup.

Final Thoughts

In equity crowdfunding, perks are meant to be a “thank you” for investing in addition to the direct investment in the company. Startups have the opportunity to offer tangible or intangible perks at different tiers or not offer perks at all. If your startup chooses to offer perks, consider carefully assessing which perks make the most sense for the people investing in your company, the costs associated with offering and fulfilling the perks, and the workload that comes with offering perks. For some companies, offering perks makes sense while for others, it doesn’t. Every situation is unique and founders should carefully consider their options.

Is your startup looking to raise capital and you’re considering offering perks? Apply today to raise capital with MicroVentures – we can help guide you through capital raising and structuring your perks!

Want to learn more about tips for startups raising capital? Check out the following MicroVentures blogs to learn more:

• Fulfilling Financial Instruments: Common vs Preferred vs Convertible
• Reaching New Audiences: Effective General Solicitation
• The Art of Bootstrapping: When to Pursue External Funding
• Less is More: Compelling Pitch Deck Design
• Navigating Equity Allocation: How Much Should I Give Up?

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The information presented here is for general informational purposes only and is not intended to be, nor should it be construed or used as, comprehensive offering documentation for any security, investment, tax or legal advice, a recommendation, or an offer to sell, or a solicitation of an offer to buy, an interest, directly or indirectly, in any company. Investing in both early-stage and later-stage companies carries a high degree of risk. A loss of an investor’s entire investment is possible, and no profit may be realized. Investors should be aware that these types of investments are illiquid and should anticipate holding until an exit occurs.