a credit card. No charges to the card
are processed until the project reaches
its preset funding goal within the time
period established at the beginning of
the project. Once the project is a go,
backers expect a reward. This often
takes the form of one-time or ongoing
discounts, products, or promotional
items such as T-shirts.
Backing an equity-based crowdfunding
project works differently. There are two
types of backers: local investors and
accredited investors. Local investors
need only prove they live in the project’s
state or district. Accredited investors
may come from anywhere but must
meet certain income or net worth
requirements. Their investments are
subject to the laws and regulations
of the U.S. Securities and Exchange
Commission. Again, the funding goal
must be met within a time limit. If not,
funds are returned to all investors. If the
goal is met and the project goes for ward,
investors can expect to get a return
on their investment as well as perks
provided by the restaurant, food truck or
Crowdfunding requires three kinds of
participants: the entrepreneur, often
called the creator, who is seeking
funds to start or expand a business; the
backers, or those willing to provide the
funds; and a moderating organization,
called a platform, to bring them together.
The platform, such as Foodstart,
Kickstarter, EquityEats and others, acts
as a facilitator and, to some degree, helps
get the word out through listing on the
platform’s website and other tools. It also
ensures that certain requirements, some
of them legal, are met.
For example, U.S. creators for rewards-based projects generally need to be at
least 18 years old. Some platforms also
require creators to be permanent U.S.
residents with a Social Security number,
a U.S. address, state-issued ID and major
credit or debit card.
Reward-based crowdfunding backers
are people—often friends of the
creators—willing to pledge a certain
amount to help a project get started.
Their initial action is a pledge made with
There are four main types of
crowdfunding. Each serves a
specific purpose and has a particular
value to those looking to raise funds
and those willing to provide them.
For food industry concepts, the two
most popular types are reward-based crowdfunding and equity-based crowdfunding.
In exchange for their contribution
of money, participants receive
rewards or perks. These could
include products, promotional
items such as T-shirts, and single
or multiple discounts.
Investors receive a percentage
of ownership in the business
based on the amount of their
investment. In best-case
scenarios, individuals get a return
on their investments.
Mainly used by charitable
organizations and nonprofits. The
contributor generally receives
nothing in return for a donation.
Individuals loan money to startups
at competitive interest rates that
are usually more favorable to the
borrower than a standard loan.