Backers believe that the “NC JOBS Act,” which would bring crowdfunding to North Carolina, will become law this spring. But even if the bill is passed, a crowdfunding expert tells WRAL TechWire that startups still face a lot of challenges in getting financial backing.

Roy Morejon, president of Command Partners, which touts itself as “the top crowdfunding marketing agency,” recently spoke at a two-day conference in Silicon Valley about the opportunities and perils in crowdfunding. The firm has helped clients raise over $5 million through Kickstarter  and other campaigns over the past three years. In a Q&A, Morejon spells out the details as well as some history behind the movement. 

  • What are some of the worst mistakes startups and entrepreneurs can make when seeking crowdfunding?

There are a few:

– Not planning in advance.
– Not every product is a good fit for crowdfunding. Kickstarter may seem like a great place to make a quick buck, but not all ideas are cut out for crowdfunding. Do your research beforehand to see if other people in your niche have had success on any of the big crowdfunding sites or if your project doesn’t meet Kickstarter’s guidelines.

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  • Raising capital advice – a legal perspective

– Make sure that your prototype works, and you have the photos and videos to prove it. Backers want to know that they’re not getting behind vaporware.
– Not consulting with experts. This can be an agency like Command Partners, or someone that you know that has crowdfunded before.
– Setting a funding goal so low that you’re unable to fulfill rewards.

  •  What are the key reasons why crowdfunding has become so popular?

Crowdfunding has become popular primarily because it has broken down the barrier to entry that many innovators have had before – raising a large amount of capital to bring a product to market. Entrepreneurs previously had to raise capital, manufacture a large initial run of their product, and then attempt to negotiate a reseller relationship or sell it on their own.

With crowdfunding, these ideas can come to life with a low initial investment by the project creator, and receive the needed funds to manufacture the product after a successful campaign.

  • How are companies faring so far that have raised capital with your assistance?

So far they’re doing very well! Many of them are still working on research and development, but a many have moved on to run successful eCommerce sites, and others have been able to sign deals with large retail distributors like Wal Mart and Best Buy based on their crowdfunding success.

The biggest surprise for every project creator is the sheer amount of work required after the campaign to manufacture and fulfill all of their initial units, while continuing to ride the buzz after their campaign to keep pre-orders coming in.

  • How are investors faring? Are investors you know about and have worked with still considering this a viable investment vehicle? Why?

We haven’t worked on any equity-based crowdfunding campaigns to date, but are expanding our marketing reach to help entrepreneurs position their companies for equity-based fundraising. All of our campaigns have been rewards-based, where the backer is pledging money in exchange for a physical or experiential reward rather than equity.

  • What are the best practices startups should put in place before seeking crowdfunding?

Build relationships first. Anyone who goes into a campaign without having done any legwork to build a social presence, PR interest, or awareness among their friends and family will be off to a very slow start. Anyone running a crowdfunding campaign needs to plan well in advance so they can launch with a community of writers and customers eager to support the campaign. You should also set up a landing page to use during pre-launch activities, and include an email signup form so that you can begin building a database of customers and backers for a launch-day release.