Advantages and disadvantages of crowdfunding
In the current times lack of funds will never stop you from starting your own business or turning into an entrepreneur. You can avail bank loans, use credit card and rely on factoring. There is another option that is gaining prominence – crowdfunding.
What is crowdfunding?
As the name suggests crowdfunding is gathering financial support from a crowd; you need not know any of them personally. It usually happens on internet but don’t be surprised if at major events too this happens. Nowadays crowdfunding is used even to cover medical expenses and not just to fund a startup. For example, in case you are planning to start a block chain you can rely on cryptocurrency crowdfunding wherein the funding is in the form of cryptos. You can also start an ICO to finance your crypto projects.
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Advantages of crowd funding
- It does not involve any upfront expenses
- It is quick and effective
- Due to the online pitching associated with crowdfunding there is a lot of exposure in the media and this turns into a marketing advantage for your product or services.
- In the initial stages itself the public reaction will give the necessary feedback and you can decide if the idea is worth going al the way through or needs to be tweaked.
- Interested investors can track your product and its popularity on all networks
- Even hard to convince ideas can get financers in this method
- It’s a viable alternate to traditional sources of loans.
- Respectable crowdfunding companies vet the project and this can help you overcome the drawbacks and make the project more viable.
Disadvantage of crowd funding
- There is no guarantee that your project will get the required assistance and all the hard work and time will be wasted.
- You might have to invest money and time to generate interest in your project
- When targets are not met you will receive nothing and the funding will return to the investors
- Till you patent your idea there is a high risk of you losing the same to some unscrupulous person.
- Your crowdfunding history will remain online for anyone to see should the need arrive and all future investors will decide their investment based on those assessment.
Irrespective of what form of finance you choose weigh all the pros and cons before proceeding.