TIE is perhaps the world’s largest membership organization for entrepreneurs. It was originally The Indus Entrepreneurs (thus TIE), a group formed by South Asian execs in the Silicon Valley. With 13,000 members, including over 2,500 charter members in 57 chapters across 14 countries, TiE hosts a wide range of programs and events, including TiEcon, the largest professional and networking conference for entrepreneurs.
I am honored to be a Charter Member of TIE Seattle. Our Chapter has a regular “Startups On Tap” event, and yesterday we held one on the topic of Crowdfunding. I was joined by 2 great speakers, Mike Brown and Stephen MacDonald of Ryan Swanson Law. I spoke about our Kickstarter campaign and lessons learned (a subject worth a long article). Mike explained the laws and legal implications, and Stephen covered the tax issues. They had great powerpoint shows which eventually I will convince them to share with ME and then the world. Guys are you listening?
You need to know what these great lawyers explained. For example: Did you know that your backers from crowdfunding will owe sales tax to the state for the goodies you give them? If they don’t pay you have to! And if you are an LLC, the revenues from crowdfunding go straight to the tax obligation of the partners unless you rack up expenses in time, and that depends on when you get the money, so don’t get the money after October! And oh my, there is a lot more that can mess up your future if you don’t plan for it. Crowdfunding is seriously challenging option for anyone who wants to raise money from investors AFTER the crowdfunding. I’ll explain later in a blog post.
In the USA, crowdfunding becomes legal this year, and it will create lots of excitement and confusion. I have just done it, with input from some of the smartest lawyers in the country. My advice: Don’t do it if you plan to raise money from future investors, and you SUCCEED with your campaign! Because then you have to satisfy all your new backers, and you are probably not really prepared, and no one will give you a penny if you can’t prove you can deliver to the customers you already have. But if you FAIL on Kickstarter or other “all or nothing” sites, you don’t owe anyone anything, and you have great market research data (if you run a good campaign). My REAL advice: Companies with physical products or games should run campaigns on Kickstarter with really high goals, then fail, then learn from the feedback, fix the product, then run again at lower goal and succeed wildly. This is Burt’s Word for Kickstarter Success. Guess what we’re doing next.
Another lesson learned is that Kickstarter is for pre-sales. People want the product, not support your mission or vision. So if you want backers who support your social goals, run your campaign on IndieGoGo. Choice of platform and messaging is REALLY important and getting more complex all the time.
We will have another crowdfunding event for TIE in Seattle, on the “west side”, soon. Stay tuned.