{"id":88,"date":"2015-10-21T11:39:22","date_gmt":"2015-10-21T10:39:22","guid":{"rendered":"http:\/\/www.utelier.com\/blog\/?post_type=toolkit&p=65"},"modified":"2019-07-16T08:50:32","modified_gmt":"2019-07-16T07:50:32","slug":"crowdfunding-legal-perspective","status":"publish","type":"post","link":"https:\/\/fashioninsiders.co\/toolkit\/legal-corner\/crowdfunding-legal-perspective\/","title":{"rendered":"Crowdfunding from a Legal Perspective"},"content":{"rendered":"
Tahir Basheer of Sheridans<\/a>\u00a0law firm shares his advice to keep you ahead of the game (note: most of the points are relevant to Equity Crowdfunding).<\/p>\n There are three main types of crowdfunding:<\/p>\n Debt Crowdfunding<\/strong><\/p>\n Investors loan money directly to an individual and hopefully receive their money back with interest. Also called peer-to-peer (P2P) lending, it allows for the lending of money while bypassing traditional banks. Returns are financial, but investors also have the benefit of having contributed to the success of an idea they believe in. An example of a Debt Crowdfunding platform is the Lending Club<\/a>.<\/p>\n Equity Crowdfunding<\/strong><\/p>\n Investors buy shares in a company and become part owners. They make a return on their investment either by being paid a dividend or by selling their shares at a later date, when the company value has hopefully increased.<\/p>\n It is up to the board of the company to decide whether to declare a dividend and how much, and if and when to sell the business, so equity crowdfunding tends to carry a higher risk for investors (but potentially the highest returns). Examples of such\u00a0platforms include Crowdcube<\/a> and Seedrs<\/a>.<\/p>\n Donation Crowdfunding<\/strong><\/p>\n People pay money to an individual simply because they believe in the cause or like the items being made. Rewards are often offered to the investor, and such rewards tend to be better the more money has been given. Examples of rewards can be: the actual item the project has been set up to fund, tickets to an event, regular news updates, free gifts and so on.<\/p>\n This is a popular crowdfunding type for emerging designers who are looking for a direct and cost effective way to reach customers. Often, this method can be simply seen as a way of pre-selling innovative items before they are made. Examples of Donation Crowdfunding platforms include Kickstarter<\/a> and Indiegogo<\/a>.<\/p>\n Fashion start-ups and designers can certainly benefit from the pre-sales models of crowdfunding platforms like Kickstarter, particularly when there is already a customer base that can be marketed to via the crowdfunding platform. Whilst the visibility that crowdfunding offers is great, the crowd might not really understand your business and if they do not fund then you will be a visible crowdfunding campaign which has not succeeded.<\/p>\nTahir\u2019s Crowdfunding Tips<\/h3>\n
\n
Related reading: Business funding for Fashion Brands<\/a><\/h5>\n