Definition and Use

Reward-based crowdfunding is a form of collective financing where entrepreneurs, artists, or creators present their projects to the public through online platforms. In exchange for financial contributions, sponsors receive non-monetary rewards, such as exclusive products, discounts, or unique experiences.

This form of financing has revolutionized the way ideas are brought to life. It allows creators to validate their products in the market before officially launching them and enables sponsors to be part of the process from the start.

Basic Operation:

1. Project Presentation: The creator describes their idea, objectives, and the required funding amount on a crowdfunding platform.

2. Definition of Rewards: Different contribution levels with associated rewards are established.

3. Promotion Campaign: Social media, email, and other means are used to attract sponsors.

4. Fundraising: Sponsors make contributions in exchange for the offered rewards.

5. Delivery of Rewards: If the funding goal is reached, the creator proceeds to develop the project and deliver the rewards.
   

Advantages for Creators:

• Market Validation: It allows knowing the real interest in the product before investing in mass production.

• Financing Without Debt: It does not require bank loans or relinquishing equity.

• Community Building: Creates a base of followers committed to the project.

Advantages for Sponsors:

• Early Access: They receive products or services before the general public.

• Participation in Creation: They are part of the development and can influence the final outcome.

• Exclusive Rewards: They receive benefits that will not be available later.
  

In the world of trading, reward-based crowdfunding offers opportunities to diversify investments and support innovative projects that can become commercial successes. For example, backing the development of a new financial application can result in both economic and strategic benefits.

A notable case is Oculus Rift, which began as a project on Kickstarter and was later acquired by Facebook for $2 billion. The initial sponsors received the first units of the device, while those who identified the potential of the technology could capitalize on related opportunities.

It is important to note that, unlike investment crowdfunding, in reward-based crowdfunding, sponsors do not acquire equity in the project. Their support is rewarded with goods or services, not with direct financial returns.

Examples of Rewards

Rewards are the driving force that motivates sponsors to support a project in a crowdfunding campaign. These can range from symbolic acknowledgments to exclusive products and unique experiences.

• Products in pre-sale: One of the most common rewards is offering the final product before its official launch. For example, a developer of an innovative smartwatch can promise their sponsors to receive the device before the general public.

• Limited editions: Creators can offer exclusive or customized versions of their product. An author funding their book may offer signed copies or special editions available only to sponsors.

• Unique experiences: Some campaigns offer experiences such as visits to the production site, dinners with the creative team, or participation in launch events. For example, a music band might offer access to a private concert or a recording session.

• Mentions and acknowledgments: Including the sponsor's name in the credits of a movie, video game, or on the product packaging is a way to recognize their support. This creates a sense of belonging and public recognition.

• Access to exclusive content: Offering updates, behind-the-scenes material, or additional content only for sponsors. This maintains interest and engagement during the project's development.
  

It is essential that the rewards are attractive and perceived as valuable by the sponsors. This increases the likelihood of the campaign's success and builds a loyal follower base.

To illustrate, consider the case of Pebble Time, a smartwatch that raised over 20 million dollars on Kickstarter. They offered their sponsors special prices, exclusive colors, and the opportunity to influence product features.

Popular Platforms

There are several platforms that facilitate reward-based crowdfunding, each with its own characteristics and approaches. Knowing them is essential to select the most suitable one for your project or investment.

• Kickstarter: It is the most recognized platform worldwide. It focuses on creative and technological projects. It has launched products like the aforementioned Oculus Rift and the board game Exploding Kittens.

• Indiegogo: Offers more flexibility than Kickstarter, allowing flexible funding campaigns where the creator receives funds even if the goal is not met. Ideal for projects in initial stages.

• Ulule: Popular in Europe, it is known for supporting cultural, artistic, and social projects. It is an excellent option for creators seeking an audience in the European market.

• Verkami: Of Spanish origin, it specializes in cultural and creative projects. It is a key platform for artists and entrepreneurs in Spain and Latin America.

• Patreon: Although it operates slightly differently, it allows creators to receive ongoing support from their followers in exchange for exclusive content and periodic rewards.
  

When choosing a platform, consider factors such as the target audience, fees, promotion tools, and the policies of each site.

In conclusion, reward-based crowdfunding is a powerful tool for both creators and investors. It allows for financing innovative projects, building communities, and spotting opportunities at early stages. As Peter Lynch, a famous investor, once said: "Know what you own and why you own it." Understanding the functioning and potential of reward-based crowdfunding enables you to make informed and strategic decisions in the trading world.