Crowdfunding; the advantages and disadvantages.

Nowadays, many people turn to crowdfunding in other to generate capital to make their business idea are reality. It seems like a pretty easy thing to do; pitch an idea/product and get donations from interested people. But even something as free, convenient and profitable as that has its pros and cons. Today we’ll be looking through several advantages and disadvantages of crowdfunding you should take in mind before setting up your own campaign.

Crowdfunding; the advantages and disadvantages.

Advantages

Here are some certain points that could make crowdfunding desirable and a great idea for you.

1. Crowdfunding is free. You do not need a large sum of money to pitch your idea. You only pay a share (generally around 5%) of the generated funding. This is why crowdfunding is relatively risk free.

2. Another great advantage of crowdfunding is the increase in awareness and free marketing. Having your product on a crowdfunding platform allows for free traffic. If your network is not big enough to gather the needed funding, crowdfunding can greatly help you eliminate that problem by getting your product in front of thousands.

3. In addition to the point above, putting your idea out there will result in feedback from the public and from backers. This can help you improve your idea or even the final product!

Disadvantages

While crowdfunding offers some amazing possibilities, there are also some disadvantages to it.

1. Idea theft is a possibility in crowdfunding, especially when you haven’t protected your idea with a patent or copyright. You have to be careful what information you want to give away regarding your idea (especially any technical features), and try as much as possible to have it protected legally.

2. There are many crowdfunding platforms with many projects that do not reach their target funding. Crowdfunding is not an assurance that you will get funds or backing, it still takes a strong product, planning and good marketing plan. That being said, do not get discouraged if your first campaign is not a success. Analyse, learn, improve and try again!

3. Another disadvantage is the “all or nothing” method implemented by most crowdfunding platforms (like Kickstarter). You should keep this in mind, because if your funding target is not realistic you might not reach your goal and not keep any of the money raised. But this also works the other way around. If your target goal is too low, you could lose money when production start and costs are higher than expected.

Proper planning, knowledge and risk management will help you decide if crowdfunding is the way to go for your business. Keep these points in mind when next crowdfunding comes to mind.

Do you have any questions about crowdfunding?