Crowdfunding has become a way for startup founders to raise capital by engaging with potential investors beyond high net-worth accredited investors. It can be important for investors to understand the perks associated with crowdfunding campaigns in order to make informed investment decisions.  Today, this blog will discuss what crowdfunding perks are, the types that exist, and how investors may want to evaluate available perks.

Understanding Crowdfunding Perks

What are Crowdfunding Perks?

Crowdfunding perks are incentives that are offered to investors in exchange for their financial support of a startup. Crowdfunding perks may enhance the overall appeal of a project and can also motivate potential investors to contribute. The perks that a company offers can range from early-bird specials to physical products like swag, depending on the time of the investor’s contribution. By understanding the perks offered, investors can make informed investment decisions.

Common Types of Perks

Early-Bird Perks

Early-bird Perks are exclusive, time-sensitive offers for investors who pledge to a crowdfunding campaign at the beginning of the raise. These perks can include discounted rates, limited-edition products, or other incentives designed to encourage support. These perks are tied to a time frame, making it first-come, first-serve, so it can be important for investors to keep that in mind when deciding to make an investment in a startup. The early-bird perks are typically for the investors who are funding the campaign up to a certain predetermined amount or until a certain date.

Favorable Valuation Cap

One type of early-bird perk that startups might offer is a favorable valuation cap for early investments. The potential perk applies in that early investors may receive a lower valuation cap for their crowd note. A valuation cap is the pre-determined maximum valuation of a company at which the investor can convert into equity shares if a trigger event occurs.

For example, an early-bird perk might be that investors who fund the first $50,000 will receive Crowd Notes with a conversion provision based on an $800,000 valuation cap instead of a $1 million valuation cap. This same example can be applied by date, where the lower valuation cap could apply to investors who invest within the first 60 days of the raise. Anyone who invests after that period of time would then fall under the $1 million valuation cap.

Time-Sensitive Products/Experiences

In addition to early-bird specials, startups may offer exclusive products or services to investors who invest in their crowdfunding campaigns. These exclusive opportunities can hold an appeal because they are limited time offers, which could create a sense of urgency that may encourage investors.

Some examples of these time-sensitive early-bird perks include:

• Invest any amount before a certain date and be entered to win a raffle prize
• Invest $500 before a certain date and get a branded T-shirt from the company
• Invest $1,000+ before a certain date and be invited to an early investor launch party

Intangible Perks (Experiences)

Crowdfunding campaigns can offer unique experiences as perks, like special access to behind-the-scenes of the startup, opportunities to meet the founders, or other exclusive events. These kinds of experiences can create deeper connections between investors and startup founders because the investors are now able to engage with the company in a more personal way than just investing money and getting swag in the mail.

Perks that are considered experiences can create loyalty among investors. When investors are allowed to interact with founders, it could create a sense of belonging and increase advocacy for the startup. Overall, experiences can engage investors in a way that can help them remain engaged in the long run, even after the fundraising campaign has ended.

Examples of intangible perks include:

• Recognition on the company website
• Tour of the facilities
• Invitation to exclusive events

Tangible Perks (Products)

Physical rewards are also offered in many crowdfunding campaigns. These rewards are often offered in addition to the other perks and can help investors feel connected to the campaign. The value and quality of the physical rewards can be important factors for investors. If rewards are thoughtfully made, they can generate excitement among investors and supporters, potentially encouraging them to share with others.

Examples of tangible perks include:

• Branded t-shirts, mugs, or bags
• Product samples
• Gift cards or vouchers for the product

Evaluating Perks as an Investor

Perks can be incredibly enticing to investors, especially if the perks are offering exciting rewards, experiences, or early-bird specials. It can be important to remember to be cautious though, as perks are just an added bonus for an investment in a company. Investors should research the startup and perform due diligence to help decide if the investment is appropriate for their portfolio and not base it on the perks being offered.

Final Thoughts

Understanding crowdfunding perks can be important for making investment decisions. The perks can not only enhance the appeal of a campaign, but they can also provide tangible rewards. Perks are meant to be a thank you from the company for investing, and not all offerings will offer a perk. It’s always important to do your due diligence when investing, regardless of perks. If you’re ready to explore offerings live on the MicroVentures platform, head to the offerings page. Read the terms carefully to understand the investment opportunity as well as any perks that may be available for a specific offering.

Want to learn more about investing in Regulation Crowdfunding? Check out the following MicroVentures blogs to learn more:

• Convertible Notes in the Private Market
• Democratizing Access: Role of Crowdfunding Platforms
• Keeping a Clean Cap Table: Understanding Crowd Notes
• Investing in Crowdfunding as an Accredited Investor

Are you looking to invest in startups that are crowdfunding? Sign up for a MicroVentures account to start investing!

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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.