Often as a business leader we try to work out - what type of business…
The Pros and Cons of Crowdfunding
Crowdfunding has taken the start-up ecosystem by storm. Companies like Kickstarter, Seedrs and Crowdcube have become a funding choice for entrepreneurs.
What may have seemed slightly risky or too unconventional for a mainstream business, have now become established and a clear alternative route to get funding into your business.
If you are considering raising finance for your business via crowdfunding, there are a number of factors that you might want to consider first.
The Pros (and there are many), our six advantages of crowdfunding;
1. It can often be a quicker way to raise finance with no upfront fees (but here is a great rundown on the fee structure for most platforms).
2. Pitching your business on an online platform can be a valuable form of global marketing.
3. It can be a good way to test your markets view on your product/idea. Potentially if people are keen to invest it might be a good sign that the your idea has market validation.
4. If in the long term you are looking for equity investment, investors can track your progress. Likewise some business ideas that may not appeal to conventional investment or funding routes may secure get financed via crowdfunding.
5. Your crowd investors can often become loyal customers.
6. You can mix private angel investment with funds that secured from the crowd – and of course it opens up your business to a funding route that has global attention.
The Cons (and there are plenty), our six disadvantages of crowdfunding;
1. It isn’t necessarily an easier process. Not all projects that apply to crowdfunding platforms will get the go ahead to raise funds and that task can be tough.
2. You need to invest a lot of work in building up interest before your project launches. You will know with in 24 hours if your campaign will be successful or otherwise.
3. Unfortunately if you don’t reach your funding target, any funds that has been pledged will not make it to you.
4. Your reputation is up for grabs if your project fails.
5. If your business hasn’t protected your business idea with a patent or copyright – then alike all publication – someone may see it and replicate your idea or concept.
6. Like all fund raising, the rewards are only available if you deliver to those who support the campaign.
If you are looking at crowdfunding for your business get in touch with us today.