There are individuals and businesses who need funding for many different types of projects. A funding method quickly becoming popular is crowdfunding. The requirements and costs associated with entry into crowdfunding platforms are relatively low. This has revolutionized the funding process. It can be as effective as federal financial relief. It may appear to be a simple process, but all aspects of it should be understood. Anyone considering crowdfunding needs to realize there are pros and cons they should understand prior to moving forward with it.
BENEFITS OF CROWDFUNDING
Centralizes Communications
Crowdfunding makes it possible for those seeking funding to have a single place to conduct discussions with potential investors. Prior to this, it was necessary to update investors using a variety of phone calls, emails, meetings, and more. Crowdfunding provides a way for a project's details to be immediately available to all potential investors. It can be used as a type of proactive marketing.
Creates Momentum
Momentum is an essential part of obtaining a successful startup investment. It happens when one investor notices another investor is interested in a particular deal. The more individuals who appear interested in investing causes others to consider it. Providing a way for investors looking Crowdfunding: The good, the bad and the ugly at a crowdfunding portal to see the other investors who have made a financial commitment to the project is a benefit. It often results in an investor being more comfortable with committing.
Creates A Market
A crowdfunding project will require targeting a specific community. One open to becoming early adopters of a project. These individuals are the ideal market. They should be the focus of the initial fundraising of a project. This is an audience that has the ability to validate crowdfunding efforts.
Raise A Lot Of Money
Many crowdfunding projects have successfully raised significant capital. This has helped fund new businesses and help established businesses grow. It is estimated the average crowdfunding campaign can succeed at raising $7,000 or significantly more.
CHALLENGES OF CROWDFUNDING
A Lot Of Work
To succeed with a crowdfunding launch, it will require making certain the campaign is done properly. This can be very complicated as well as stressful. It could involve spending money on ads, a professional marketing team, professional video and more. Doing this correctly will require putting in a significant amount of time and effort.
Close Every Deal
Crowdfunding is not a situation where people suddenly discover an investor they have not spoken with, who is very interested in their project. They won’t hear this investor has wired them a significant amount of money. Succeeding at crowdfunding requires meeting with each investor even if by phone. This is an opportunity for them to see the value of the proposed investment.
Preparation
If the proper preparation is not done, a crowdfunding project could be doomed to fail. Success will depend on the right preparation and a well-done pre-launch. This includes doing proper due diligence when it comes to gaining exposure, running ads, as well as compiling emails for a project before it is launched, and more.
Negative Feedback
A crowdfunding project will involve going into the public domain. This is the age of the internet troll. This can present challenges when trying to attract investors. Sometimes projects will get comments that are negative as well as very hateful. It's a situation that can influence investors and be emotionally challenging.
Saturated Market
There are many situations where similar products and services are all attempting to get funding using a crowdfunding platform. The most successful ones are those with projects and ideas that are exciting as well as truly original.
Like all aspects of having a business, a successful crowdfunding experience will require commitment. There may be unknown issues that arise. It's possible the challenges associated with it may make this funding vehicle seem too hard. It's also possible the experience may not meet expectations. When considering utilizing a crowdfunding platform, it is important to know all the challenges as well as benefits.
Guest post courtesy of Lewis Robinson