Crowdfunding is an alternative form of financing designed to help creative projects and ideas get off the ground. The money collected via crowdfunding consists of contributions made by supporters who have some sort of interest in seeing a certain project come to fruition. Crowdfunding does not involve what you might call "traditional" financing institutions, such as commercial or development banks (which are seldom involved in funding the creative industries in the first place). Supporters do not necessarily gain a personal benefit from crowdfunding; in fact, supporters often support a project for purely idealistic reasons. Usually, supporters support a crowdfunding project by paying a sum of money, i.e. by contributing financial resources. However, it's also possible in some cases to support a crowdfunding project by providing material resources. In return for their support, whether it be financial or material resources, supporters can expect to receive either some form of return service or nothing at all – it all depends on the nature of each individual project. Each crowdfunding project is carried out by means of an online campaign connected to one of the many - although by now a little fewer - crowdfunding platforms out there today. If you're interested in reading a more in-depth definition of crowdfunding, please click here.

At the moment, there are four basic types of crowdfunding referred to in the 2012 Crowdfunding Industry Report. Below is a summary of these different types of crowdfunding as defined by ikosom, the Institute for Communication in Social Media:

Reward-based crowdfunding for non-monetary rewards. This type of crowdfunding was the first to become popular. It involves the following basic procedure: supporters give money or material resources to a project with or without a return service. For example, as a thank-you for their financial support, film-project supporters might receive a small role in the film they've sponsored, or their name might be listed in the film credits – or both ("crowd sponsoring," (creative) ideas, micro-sponsoring, (ideal) premiums).

Donation-based crowdfunding for philanthropy and sponsorship. This involves fundraising activities via platforms such as Betterplace. In this case, cash only is donated ("crowd donation," causes, donations, good feeling, donation receipt, community aspect, concrete projects).

Equity-based crowdfunding for financial return. This is what is referred to as "crowdinvesting". Investors invest in a startup or company and are given a share in the company's success proportionate to the amount they funded. This also means, however, that investors must accept the potential loss of all of the capital they invested in case of failure ("crowdinvesting", startups, micro-participation, profit sharing).

Lending-based crowdfunding for financial return. Here, too, we're dealing with a form of crowdinvesting. In this case, however, private investors loan money via a platform operator. In other words, this involves a micro-credit that is granted to a project and paid back with interest according to a pre-defined plan. In return, investors can expect the repayment of their money plus interest within a certain time period. ("P2P lending", startups, micro-credits, repayment).

Please note: Hybrid forms of crowdfunding and crowdinvesting are also possible. Click here for additional information from ikosom about the different types of crowdfunding.

This is something you definitely have to figure out for yourself in advance. First and foremost, a crowdfunding campaign should always be well thought through prior to launch. You'll have to devote a lot of time to things like preparation, implementation and follow-up. In general, however, crowdfunding is ideal as a form of start-up financing or as a way to finance a project – or parts of a project – over a certain period of time.

Here are some questions you should try to answer in advance: What exactly is my project? What goal am I trying to achieve with my project idea? Whom exactly do I want to reach? Who is most likely to support my project? Do I require long-term financing involving a large sum of money or not? And don't forget that crowdfunding usually involves mostly temporary funding, i.e. concrete financing that has a beginning and an end. In general, this form of funding is a one-time thing.

Should you need help answering these questions, you can request an appointment for our free crowdfunding consultation here. We offer an initial consultation in which you can clarify these questions. Please note: We do not offer campaign consulting or support, but an introduction to the topic with a focus on reward-based crowdfunding.

Crowdfunding platforms provide the necessary infrastructure you'll need – including such things as payment systems and supporter management systems – to carry out an effective campaign. Plus, these sites also give your project a certain level of exposure. One key factor in using crowdfunding campains is the ability to reach a wider audience and to make sure your project idea can stand up to the scrutiny of the general community. The use of a crowdfunding platform is worthwhile especially if your campaign is designed to move beyond your circle of friends and/or any word-of-mouth to reach a larger circle of potential supporters. Indeed, this new and larger group of potential supporters might even include community members who are already active on your chosen platform - although this effect should not be overestimated either. At the same time, crowdfunding platforms offer essential consulting services and strategic advice that can contribute to the overall success of a project. In fact, in some cases, the one-on-one advice provided in advance by the platform team helps to prevent first-time mistakes. And, finally, the press likes to cover unusual crowdfunding projects showcased on platforms, and this coverage can give campaigns the extra public attention they need.

A crowdfunding campaign should be well thought through in advance, then carefully planned and finally presented in a clear and appropriate manner. There are many factors you should think about before you launch: What is the ultimate purpose of my campaign? What kind of goals is it based on? Is it really the best form of financing for my project? What do I want to achieve with my project? Who are my potential supporters? For example, one very key element when presenting your campaign on a platform is the ability to provide effective and meaningful images and videos for potential sponsors to examine.

There are currently a number of guides that provide detailed explanations regarding when and under what circumstances you should start a crowdfunding campaign. They also outline what conditions should be met before you start. Here's a quick overview:

• Upload-Magazin: Essential success factors involved in crowdfunding projects
• Book by Alexandra Harzer: Success Factors in Crowdfunding, a summary can be found at Alexandra Harzer: Success Factors in Crowdfunding
• The Institute for Communication in Social Media (ikosom) offers a number of easy-to-read and informative guides as well as background materials relating to the theme of crowdfunding
• Many of the individual crowdfunding platforms have guides with tips on how best to start a crowdfunding campaign.

The first thing you should do is figure out whether or not crowdfunding is the most appropriate form of financing for you and your project. After that, you should find out which of the crowdfunding platforms is best suited to your needs. It's a good idea to read the guidelines on the platforms themselves and maybe even talk to the operators in person. If the platform approves your crowdfunding campaign and takes on your project, then you're set to go. You'll be able to find the concrete Terms & Conditions (AGB) on each respective crowdfunding platform. Don’t forget, it's possible that a platform might reject your proposed campaign after a pre-interview or pre-check.

Most platforms charge a commission fee if you actually succeed in financing your project in the target amount – this fee usually runs between five and 15 percent. Most platforms also highly recommended that you prepare an effective and attractive video or some sort of image series when you start your campaign so that potential supporters can get a better idea of your plan and so that it can proceed successfully. And don't forget that you have to carry the costs of preparing these videos/images.

You can start a campaign alone or with other individuals. In each case, however, there has to be one specific contact partner and one principle person responsible for the project.

In general, all EU citizens with a bank account within the EU can carry out a project in Germany if the project operates under German law and has a German legal form ("Rechstform"). Please consult each platform's own guidelines to find out about their individual provisions.

Portals usually charge a commission fee that varies from platform to platform – the percentage ranges from four to 15 percent of the targeted amount. Please note: in general, the amount only has to be paid if the crowdfunding campaign is successful. Please ask the specific platform. 

The minimum amount of funding varies from platform to platform. It's handled in the same way as the time period in which the project must be financed.

Not really. A project can be "over-financed" but it should not be "underfinanced".

The answer to this question differs from platform to platform. You should always get as much information as possible in advance about concrete conditions from the different platforms themselves. 

On most platforms this is possible only in exceptional cases and only after prior consultation with the portal operators. Please ask the respective platform. 

In general, the rule is that if your crowdfunding campaign doesn't succeed in acquiring the targeted amount, the individual amounts provided by existing supporters will be transferred back to them by the respective platform. The issue as to whether or not interest is paid, how much interest is paid or if there are any back-transfer fees is handled differently by each platform.

This is something you would have to discuss with your chosen platform. In general, crowdfunding portals don't really like to do this, and most of them don't recommend it at all. Instead, you should probably ask yourself the following question: Why was my funding round not successful? You should always talk directly to your crowdfunding portal about the possibility of a repeat crowdfunding drive. Many portals recommend a second round of crowdfunding only in the case of a follow-up project.

Again, this would need to be discussed directly with the platform; however, in general, it's also not recommended. In most cases, the majority of portals recommend a second round of crowdfunding only in the case of a follow-up project. It is possible, however: for example, the "Bud Spencer" project had campaigns on different platforms.

It's not always prohibited, but it usually doesn't add any value. On the contrary, it often confuses the crowd and doesn't always achieve the goal you wanted. But you should always inquire directly at the portals you're working with.

All individuals who have reached the age of 18 and are geschäftsfähig, i.e. "legally competent."

It depends on the platform. It's possible to provide your own equity capital on Startnext , but your own share cannot be greater than 50 percent. Again, it's important to always consult the information provided on each respective platform.

Everyone who starts a project is required to pay VAT ("Umsatzsteuer"). The amount of tax you pay depends on your tax situation, i.e. whether you're a small businessperson ("Kleinunternehmer"), a non-profit organization ("gemeinnütziger Verein") or a company ("Unternehmen"), etc. The best thing would be to speak to a tax advisor in advance about your crowdfunding project.

The answer to this question differs from platform to platform. For example, Startnext permits donations if the entity behind the project is a non-profit organization, a foundation or another association officially permitted to accept donations. Again, it's best to talk to the platform operators directly about the modalities and opportunities. Even better in this case would be to consult your tax advisor.

Crowdinvesting is a sub-form of crowdfunding. Whereas reward-based crowdfunding seeks to support and finance creative projects mainly via small amounts contributed by supporters, crowdinvesting involves an investment in a startup or company. In other words, crowdinvesting turns supporters into investors. For example, individuals who support a crowdfunding project by pledging a sum of money usually receive some sort of return service, i.e. a CD or a photo: however, investors who invest in a startup as a part of crowdinvesting project are looking for a return on their investment, i.e. to receive any gains or exit proceeds generated by that company.

The concept of "crowdinvesting" arose in 2011 as a sub-concept for crowdfunding projects. In the English-speaking world, the term "equity-based crowdfunding" is also often used to refer to crowdinvesting.

Most crowdinvesting projects are not older than two years. Crowdinvesting is an especially interesting form of financing for startups and young companies, in particular as a way of testing a product or market model. If the crowdinvesting process is successful and the project is accepted by the "crowd," it's already seen as having a good chance of success on the market afterwards (if that's where it's headed). In the startup phase, crowdinvesting can also be helpful in further establishing that particular business concept on the market or in stabilizing the company and allowing it to take key development steps.

In all cases, the following questions should be answered in advance: What happens after the crowdinvesting campaign? Is my business model sustainable and can it survive on the market? Will I need additional capital after the campaign ends? If so, how much will I need? How will I generate that capital? etc.

At the moment, crowdinvesting in Germany involves primarily the following contract models:

• Shareholder loan 
• Co-operative shares ("Genossenschaftsanteile") are bought by a co-op via a platform. Currently, Startnext is the only site where this is possible, and please note that this model is provided by Startnext Network GmbH and not by Startnext gUG.
• Atypical silent participation 
• Profit-sharing rights 
• Shares ("Aktien")
• Lending of Credit (“Kreditvergabe”) 

In contrast to crowdfunding, such sites don't exist yet in the world of crowdinvesting. For example, there is no crowdinvesting platform devoted entirely to the field of music.

Individual crowdinvesting portals differ from one another in the type of financing and participation models they offer as well as in the general procedures involved in each crowdinvesting campaign. To make sure you have the most up-to-date information possible, always consult the individual platforms to find out more about the types of financing and crowdinvesting procedures.

The first thing you should do is figure out if crowdinvesting is the right form of financing for you. The next step would be to choose the most appropriate platform for your needs. If necessary, you should consult directly with the platform operators. Once you've found the best platform for your project, and as soon as the platform approves your project parameters, you can start right away.

As a general rule, you can only start a crowdinvesting campaign in Germany if yours is a German company that comes in the legal form of a "GmbH" (limited liability company) or an "Unternehmergesellschaft" (entrepreneurial company or UG).

Yes, but this amount is always determined by the respective platform. 

When crowdinvesting platforms get involved in your project, they become participants in the successful crowd-financing of your startup or company. The amount of the fee they charge depends on the platform, but it's usually between five and 10 percent of the successful financing sum. There are also some potential additional costs, such as payment transaction fees. Please consult each individual platform for more information.

There is no real maximum amount, but you should note the following: There is a so-called "prospectus requirement" ("Prospektpflicht") that kicks in starting at an amount of €2,5 million. In any case, each company should carefully consider how much capital is truly needed. Sometimes, even €10,000 to €25,000 is enough to create a first prototype or to demonstrate that the concept works.

Most platforms charge a commission fee in the case of a successful financing round – usually between five and 10 percent. Please note, however, that you will need to create a professional presentation before any financing project can be successful. For example, just the creation of a video or professional photos can cost anywhere from €2,000 to €5,000. It might also make sense to have a lawyer look over the contracts. In other words, you should have some capital available in advance.

Usually nothing happens, because the funding and thus also the investments simply don't come to pass in this case (for more, see question above).

The answer to that question varies from platform to platform.

Under certain circumstances, you can. But, of course, you will have to discuss this directly with the crowdinvesting platform you're working with. 

On most of the platforms, no, you can't.

There is no limit up or down in terms of the number of micro investors. However, a so-called "funding goal" is always set together with the respective platform. A number of steps are carried out prior to launch in order to determine this goal: first, an evaluation of the company is conducted in consultation with the respective platform; then, a desired target amount set as the goal of the crowdinvesting campaign; in the next step, an agreement is made with regard to what percentage investors will be involved; and, finally, that percentage determines the percentage share of company profits that will be sold to micro investors.

On most platforms, it's not possible to exclude certain investors. All legally competent individuals ("geschäftsfähige Personen") can thus become investors. On the other hand, Innovestment has a so-called "activation process" ("Freischaltungs-Prozess"): as part of this procedure investors are obliged to request access to the detailed documents, and without this "activation," they cannot submit an offer. This process gives the company the freedom to reject investors if they so desire.

That is handled differently in different cases. Contact the respective platforms to get more information on their policies. In general, you should always pay special attention to whether or not a crowdinvesting platform offers a system that enables the raising of capital after the crowdinvesting round on their site.

The marketing effect of a crowdinvesting campaign is often just as exciting and rewarding as the raising of capital itself. Each and every startup is encouraged to present its profile to a wide audience during the campaign and then to use that attention to its own benefit. For many companies, crowdinvesting is the first test on the open market. In this key phase, crowdinvesting platforms play an important role in presenting the startups to the general public.

You have to be at least 18 years of age and legally competent ("geschäftsfähig"). Young individuals under the age of 18 can only start a project with the help of their parents or supervisor, and these guardians must agree to take on full responsibility for all duties and responsibilities associated with the start of the project.

Yes, contracts arise in all forms of crowdfunding, even in donation-based and lending-based crowdfunding, i.e. they create a legally binding contractual relationship between the individual responsible for the project and the supporter and/or investor.

Generally, no, but please consult the precise Terms & Conditions (AGBs) on each respective platform.

Yes, supporters have a right to withdraw ("Widerrufsfrist") within 14 days after the completion of a successful financing phase.

First of all, an idea has no "threshold of originality" ("Schöpfungshöhe"), whereas an elaborate screenplay or a finished logo does. Also, no one is safe from copyright infringements or from having their ideas stolen. Some authors, investors and developers apply for a patent on their product in advance of their campaign. Basically, each individual has to decide for themselves whether and when they should opt to do that.

A project site is a public entity and thus subject to the basic principles of German law with regard to online offerings and the protection of minors. Please consult the respective platforms for more detailed information on the various provisions and principles.

Each respective platform is always responsible for the protection of personal data and personal rights. Each platform is also responsible for adopting regulations and publishing them in their data protection guidelines.

A bankruptcy usually has no affect on completed funding. Always consult the respective platforms and, if necessary, also get legal advice in advance.

Even if a crowdinvesting portal goes broke, a bankruptcy usually has no influence on completed funding rounds. Always consult the respective platforms and, if necessary, also get legal advice in advance.

Culture promotion is the totality of publicly funded or subsidized culture within a community. The responsibility of cultural promotion is anchored in the respective state constitutions. Thus, in Berlin, culture promotion deals on the basis of the Landeshaushaltsordnung - LHO in the form of grants or subsidies. Only non-profit projects and non-profit-making organizations are funded (commercial cultural providers and projects fall into the field of business development). Crowdfunding, on the other hand, is a (still) rather young form of self-financing supplementing culture. The funding is provided by a variety of fans and supporters instead of public funding.

Public support for culture is usually based on lack-of-need financing - regardless of whether projects or institutions are to be financed. The difference (lack of need) finances the promotion, so only the "gap" will be closed. The acquisition of additional funds, so-called third-party funds, such as crowdfunding, but also donations, etc. is relevant insofar as that any Euro beyond the deficit specified in the application does not benefit the project. If a recipient of funds via crowdfunding, for example, subsequently receives more money than expected, it will be charged against the public funding. The difference between the initially granted grant and the new, smaller deficit must be repaid to the sponsor.

In principle, you should get in touch with the contact persons of the respective funding program before submitting your application for funding in order to discuss the financing plan with regard to a crowdfunding position.
In general, there are three ways to organize this:

1. Start a crowdfunding campaign first and then submit the application for public funding. In this case, crowdfunding revenues are treated like other own or third-party funds. Risk: If public funding is not granted, you have to find another donor. In the worst case, the project does not materialize. Or: The crowdfunding campaign is set up so that the project can be realized, at least in part, even without public funding.

2. The revenue from crowdfunding is included in the cost and financing plan as expected third-party funding. In case you have to justify the costs of your project in the application a deficit nevertheless arises, which is indicated as need for support. Risk: If the revenue from crowdfunding does not come in the planned amount, then you have to be able to slim down on the expenditure side.
If more revenue is generated than planned, then the shortfall is reduced. If necessary, the project can be extended by amendment in coordination with the cultural administration. Important: Corresponding amendments must be made before implementation!

3. Divide the project into two parts and initiate two financing processes. If you have a deficit in your subproject, then apply for public funding. The second sub-project is funded exclusively through crowdfunding. (e.g., exhibition through shortage; catalog through crowdfunding). Risk: If the crowdfunding revenue does not come, then you have to be able to slim down.
Please note that crowdfunding can’t be used additionally if you have already applied for the project and the project is already running. Then, with crowdfunding, you can only do something extra that matches the content of the project, but does not appear in the application.

That depends on the funding program. If you apply for a funding of ERDF (European Regional Development Fund), the crowdfunding sum must be obtained as a third-party funding prior to the application. ERDF funds can’t be subsequently co-financed with crowdfunding measures.
In the case of funding programs of the state of Berlin, applicants can generally also fill in the required funds with funds from crowdfunding. Here, however, one has to keep in mind again that if there is a shortfall in financing, any higher proceeds from crowdfunding will reduce the deficit, ie the subsidy amount.
Important: The public funding for the project can only be definitively approved by the Cultural Administration if the overall funding of the project is secured. Until then, funding can only be promised!