Why is there such a sudden hype about crowdfunding? What is best and the worst cases scenario of crowdfunding one can face?
Crowdfunding is 5 min solution to start a fundraiser and reach a huge audience at the blink of an eye and that too for free. It is an effective fundraising alternative and can be implemented in the following 4 ways
Reward Based Crowdfunding – People invest in products and ideas in exchange for incentives and discounts.
Donation Based Crowdfunding – Funders contribute to the society for good cause and expect nothing in return
Equity Crowdfunding – People support startup in return for equity in the startup and alson share amount of profits generated.
Debt Crowdfunding – Investment is made in startups and projects with promise of return of some profit and the invested amount
I believe crowdfunding is a very convenient option to pitch your product to millions and raise funding to get it done
Crowdfunding lifts you above the reach and geolocation barriers and relieves you from the burden of debt.
It is highly effective and easy to implement, providing you the opportunity to reach a huge list of potential investors, throws location barrier out of the park and to top it all of it validates your Business Idea.
Simple, if people are interested in investing in your product that clearly indicates that your product idea is worth it and you are on the right track. It already improves your brand authority and provides worthy Brand marketing.
Yeah crowdfunding has huge amount of benefits but there are downsides too. Publishing an idea in front of the world makes your idea vulnerable and at huge risk of getting copied.
Crowdfunding is no joke and if not thought through can lead to huge damages. Not getting the rewards and equity ratio right can give way too much business to the investors.
On the other hand if the target amount is not reached, then the investors are returned their share of money and the business remains unfunded.
Crowdfunding success totally depends on its implementation and presentation. If implemented with appropriate limitations and protections one can fund many companies and involve a huge amount of people to contribute. It can sort campaigns requiring donations to thrive. Involving people can help such campaigns be funded and help the needed
The best that can happen to any fundraiser is that you receive the total amount you proposed and the worst that could happen is your idea gets copied and you get screwed over.
Pros of Crowdfunding-
1. Apart from raising money, it also can get you a lot of attention, on social media.
2. Successfully crowdfunded projects give you almost instant access to funds.
Cons of Crowdfunding-
Public display of an idea risks others copying it.
Advantages of Crowd Funding:
1. Businesses set a target amount that they want to raise for their project. If this is hit they get every penny.
2. Successfully crowdfunded projects can get huge amounts of attention, on social media and elsewhere, which can help them grow beyond what the money raised alone could have done.
3. Pitching a project or business through crowdfunding can be a valuable form of marketing
4. Some businesses raise £100,000s in just a few days, giving them almost instant access to funds
Disadvantages of Crowd Funding:
1. If the target amount isn’t reached, potential investors get their money back and the business goes away empty-handed
2. Failed projects risk damage to the reputation of the business and people who have pledged money to them
3. Such a public display of an idea risks others copying it
The benefits of crowdfunding:
– It’s more efficient than traditional fundraising.
– It generates traction, social proof, and validation.
– It’s an opportunity for crowdsourced brainstorming to refine your idea.
– It gains you early adopters and loyal advocates.
– It doubles as marketing and media exposure.
The disadvantages of Crowdfunding:
– It will not necessarily be an easier process to go through compared to the more traditional ways of raising finance – not all projects that apply to crowdfund platforms get onto them
– When you are on your chosen platform, you need to do a lot of work in building up interest before the project launches – significant resources (money and/or time) may be required
– If you don’t reach your funding target, any finance that has been pledged will usually be returned to your investors and you will receive nothing
- Pros: Access to ‘cheap money’ means it allows you to raise money for your project or business without selling an equity stake in your business. Pre-funding the next project which means it is a great way to lay the groundwork for the next innovative project.
- Cons: Once you’ve successfully raised money, the pressure is on to ship whatever you’re producing. And because of the binary nature of some crowdfunding campaigns, you can wind up doing a lot of work with potentially little payoff.
Pros: If you are looking to start a business, crowdfunding can give you a head start. It allows you to launch your idea quickly with minimal personal financial investment. It requires a very low investment before you start the campaign. This means there is no obligation to do anything if you do not reach the goal. This is a huge benefit that is often overlooked.
Cons: Though it may be less than a traditional fundraising route, you still will have to invest time in the project. The time required will be less than actually carrying out the entire project and then moving into marketing, but a campaign will still require your time.
Crowdfunding is often remembered for the freak campaigns that get media coverage. And because of that, we think something has to go viral to succeed. But that’s not true. Crowdfunding provides the backing for a lot of perfectly typical business ideas.
Think of crowdfunding as a platform for reaching hundreds or even thousands of ready investors with one pitch and it suddenly makes a lot of sense.
Just remind your clients that the principles of attracting investors remain the same here as anywhere. They’ll need a professional pitch, backed up by a coherent business plan. And you’ll need to help them create forecasts, graphs and charts to help illustrate the venture’s potential.
Crowdfunding is gaining huge importance among startups. But it requires excellent strategizing and execution. There are certain pros and cons of crowdfunding such as:-
It’s easy to raise money through crowdfunding as potential investors already know how it works.
It’s a great platform to promote and campaign the brand that gives us increased exposure.
It’s a huge investment of time and money and there is always a risk of failure.
The pros of crowdfunding:
There’s not much financial risk
Your campaign could go viral
A successful campaign validates your business idea
The cons of crowdfunding:
It takes time & money
Your campaign might not succeed
It doesn’t work for all the businesses.
Benefits of crowdfunding:
It’s more efficient than traditional fundraising,
It’s a place to build traction, social, proof, and validation,
It’s an opportunity for crowdsourced brainstorming to refine your idea.
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