I'm thinking of crowd funding a project myself, and have looked closely at the Kickstarter model. There, people post projects with funding goals. If fans of a project pledge enough to meet the funding goal, then the money flows to the project owner. If the funding goal is not met, then the contributors keep their money. This prevents projects from proceeding with funds that even the project owner thinks are insufficient. It's important to keep your contributors informed throughout the project so they realize you tried your darnedest even if you failed, and you didn't just run off with the money.
In order to attract money, the project owner offers rewards, depending on the amount of the contribution. The rewards cannot be equity (or the SEC gets involved) and they cannot be cash (per Kickstarter rules). The typical rewards are recognition at the lowest levels and priority access to the product at higher levels. For example, if someone is putting a new electronic watch into production (the Pebble watch was funded through Kickstarter), you might get gratitude for a $25 contribution, but you might get an actual watch for a $200 contribution, once the watches are in production.
As with older forms of investment, early contributions typically come from friends and family, who want you to succeed even if they don't necessarily want your product. Later contributions depend on your ability to market your project and your product.
Kickstarter contributions are more like NPR donations than they are regular investments. You put up money to watch the project happen, but -- unlike NPR -- you take a chance on whether you get the premium or not. Kickstarter project owners are "legally obligated" to come through on the premium offers, but there's no formal enforcement mechanism.
That is interesting advice. My thought was along those lines, for example first dibbs on finished product, or units at wholesale cost with the price of the original donation subtracted (ie. device wholesales for $1,200, you pledge $200, you get your first one at $1,000). Many other arrangements are possible.