Crowdfunding: Positives and Negatives

CROWDFUNDING 1
CROWDFUNDING
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CROWDFUNDING 2
Introduction
Crowdfunding involves raising money for a business idea or the business through using
social media platforms and the internet to reach out to people (Micic, 2015). The donations are
made through the online platforms. An entrepreneur evaluating if crowdfunding is the right way
to raise capital should consider this positives and negatives of crowdfunding.
The Positives
These are the benefits of crowdfunding
i) Access to capital
Crowdfunding offers fast access to the funds raised. The campaign usually lasts for a
maximum of 90 days, meaning, there is less pitching, negotiating and prospecting as it is the case
in the traditional system. There are no upfront fees paid, and no equity is needed. In its place,
you place an offer for investors through reward-based incentives.
ii) Establish a market
It is difficult for a new business to find customers. However, crowdfunding helps to
establish a customer base for the business (Ennico 2016). Investors involved in offering capital
create a reasonable basis for the market. Due to the large number, crowdfunding reaches to; there
is the possibility of attracting more customers as well as engage with potential clients.
iii) Market validation
Crowdfunding is an essential aspect in evaluating how the public reacts to your business
idea. Finding investors who are interested in investing, is a good sign that the idea will do well in
the market. This reduces the risk of introducing the product in the market for the first time.
iv) Develop a marketing strategy