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Advantages and Disadvantages of Crowdfunding
5 months ago

 

 

Crowdfunding has gained significant popularity amongst many people as a way of sourcing funds. Crowdfunding can generally be defined as a cooperative effort by individuals who network and pool resources through the worldwide web to support efforts initiated by people or organizations. Activities such as start-up companies, political campaigns disaster reliefs and so on have been seen to benefit from this platform. There is a lot of potential that comes with this avenue however for a case such as a startup; entrepreneurs need to weigh the advantages and disadvantages before choosing crowdfunding as a method of raising capital. Beginning with the benefits, most entrepreneurs are faced with the trouble of accessing capital to embark on new businesses.Through crowdfunding, entrepreneurs can acquire money without having to give up any of their assets or even accumulating debt. A specific type of crowdfunding referred to as rewards- based crowdfunding allows entrepreneurs to give out products or gifts in exchange for capital. You can view here for more benefits of crowdfunding or try this service for help.

 

Another significant advantage is that this platform offers a channel to market new businesses and to create general awareness to the public in the sense that the sites used are free and are equipped with numerous ways of reaching a significant number of people.Through this again, feedback from consumers is gathered quite early before launching the business, and the suggestions can be put into consideration and reviewed and later tested in the market beforehand.This reduces loss significantly, saves on time and places in customers considerations right from the beginning. Aside from these advantages, crowdfunding is faced with a few disadvantages.Given that the entrepreneur gives up his ideas as well as personal information, competitors with better financing can copy or steal the idea to their advantage.This increases the risk involved with this source of funding.

 

Another disadvantage to this method of financing is that it is not ideal for long-term funding but favorable for one-time projects or as an additional fundraising tool as in the case of promotional advertising. Finally, crowdfunding often has a maximum amount limit to be obtained.This is generally not favorable for startups that require a lot of money, and it forces them to look for other avenues that may need the entrepreneur to surrender assets or go into debt. Although crowdfunding has many benefits such as direct consumer feedback, brand awareness and access to capital; it is essential that the entrepreneur weighs the possibilities of his ideas being stolen, his business not being financed for an extended period and be aware of the maximum amount he can generate before so as to help him make a wise decision for his business. Here are more benefits of crowdfunding: https://www.huffingtonpost.com/entry/how-crowdfunding-has-influenced-start-ups_us_59d2182ce4b034ae778d4c24.

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