Challenges and Issues of Crowdfunding in Start-up Ventures

This essay delves into the multifaceted world of crowdfunding, specifically focusing on the challenges and issues faced by start-up enterprises. The introduction establishes crowdfunding as a mechanism for funding ventures through a large number of investors, highlighting the roles of project proposers, supporters, and mediators. The essay examines academic viewpoints, theories, and findings from various research studies, revealing the link between start-up culture and the growth of crowdfunding across different sectors. It discusses real-life examples and statistics to illustrate the practical aspects of crowdfunding, including the impact of the JOBS Act of 2012 on equity crowdfunding. The analysis also addresses the challenges such as building investor trust, the lack of information on pitching stages, and the importance of realistic goals. The essay concludes by emphasizing the innovative nature of crowdfunding and suggesting strategies to mitigate challenges, such as starting early and creating the right plan to attract funds, and analyzing the success of the adopted measures to determine improvements for better performance.

Global Entrepreneurship Assignment

Table of Contents
Assignment 1..............................................................................................................................2
Introduction................................................................................................................................2
Discussion of the main academic ideas......................................................................................2
Discussion of crowdfunding with real-life examples.................................................................3
Conclusion..................................................................................................................................4
References.............................................................................................................................6

Assignment 1
Title: An Examination of the major issues and challenges of crowdfunding, with special
regard to start-up enterprises.
Introduction
Crowdfunding is the mechanism of funding a project or a venture through the money
borrowed from a large number of investors (Kaplan, 2013). The use of these funds in the
establishment of a new venture has been increasing as people are realizing the possibility of
higher returns from the new start-ups. There is three important economic entity which plays a
role in such funds. These include the economic group who proposes the project or the
venture, the economic group who supports such ideas and an economic group which acts as
the mediator to bring these parties together.
The purpose of this essay is as follows:
 To examine the main issues and challenges related to crowdfunding.
 To examine the academic viewpoints, theories, and findings from the academic
literature as related to crowdfunding.
 To provide the evaluative and summarised findings with some real-life examples and
statistics for illustration on crowdfunding.
Discussion of the main academic ideas
There have been various research and academic findings on crowdfunding. The findings from
these studies indicate a link between the start-up culture and the growth of crowdfunding.
These funds are now being used by charities, institutes, real estate sector, non-profit
organizations, business researches, scientific research, etc. These funds are able to generate
the necessary money for investments (Kumar, Langberg and Zvilichovsky, 2015). Some of
the researchers have even observed that these funding leads to the development of projects
and ventures which otherwise would not receive any funding.

The studies indicate a growing trend in the use of crowdfunding in almost all sectors of the
economy. Some of the researchers have commented that these funds are required to innovate
and growth through undertaking new projects (Hillind, 2014).
The researchers have also commented on the issues related to the crowdfunding which
include, publication records and funding grants, as faced by the start-up companies. These
companies is at the nascent stage where they find it difficult to receive the grants and
publications to attract funds. Some of the internet sites like Consano and Experiment.com,
help the scientists avail the funds from the interested parties.
Some experts have observed that these funds have been successful as engages the hearts and
minds of the investors rather the just fulfilling the responsibility of making investments.
Therefore the result is that hundreds of people like to donate and support these venture.
However, some of the researchers have also found that crowdfunding is still at its early stage
of development. It has the capability to bring change in the way funds are acquired for
projects. Some changes in society can already be seen where funding has become less about
status.
Discussion of crowd funding with real-life examples
The concept of crowdfunding has gained importance in recent years. The changes in the
business environment due to globalization has led to the growth of such funding options.
Through the medium of the internet and other technologies, it has been possible to reach a
large number of people for investments (Sarkar, 2016). They can view the details of the
project from any part of the world and contribute to its development.
There have been many successful crowdfunding campaigns which have helped to provide the
necessary resources for the development of the projects. There have been various
crowdfunding companies which have raised amounts worth $5.1 billion. The concept of
business crowdfunding has become one of the important tools for entrepreneurs looking for
expansion (Crowdfunding provides a new source of research revenue, 2012). Through such
funds, it is possible to get support for the ideas and also get access to the initial customers.
The data from the real-life cases show that equity crowdfunding has been legalized through
JOBS ACT of 2012. As a result of this act which was signed during the presidentship of
Obama, it has been seen that the small and medium-sized enterprises got the boost. There was
an expansion in the entrepreneurship and new companies. These companies can now make

public advertise for the requirement of the funds. These crowdfunding campaigns are known
as General Solicitation.
The cases from the real-life example also indicate that one of the biggest challenges in
crowdsourcing is developing the trust and confidence of the investors for their investments.
The investors are concerned about the credibility of the projects and the ventures that are
being funded through such investments (Stephen, 2017). There have been many instances
when fraudulent campaigns are conducted which result in the loss of money of the investors.
Another challenge which affects the crowdfunding is that there is a lack of information
related to the appropriate stage for pitching. The young entrepreneurs with a great idea have
insufficient information to reach the right investors. Some of the crowd-funders are not able
to estimate the time of return appropriately. They calculate the targets with lack of estimation
which creates distrust among the investors. The goals defined by the entrepreneurs should be
realistic and achievable (Aldrich, 2014). Building expectations which cannot be fulfilled lead
to dissatisfaction among the investors and idea supporters.
Another major setback received by crowd funders also indicates that they tend the pitch the
campaign even before they develop the interest among the people. It is important that the
entrepreneurs, first build the interest in the idea and then aim to raise the funds for the
campaign (Wahjono et al., 2015). The entrepreneurs also should chart out the strategic way in
which the expectations of the investors will be met. These challenges indicate that obtaining
funds through crowd funding is not as easy as many young entrepreneurs may think. They
need to find the right platform and the right strategy so that the adequate amount of funds can
be raised through such methods. Some of the suggestions to overcome the challenges include
starting early before the actual financing need arises and creating the right plan to attract the
funds from the interested parties. The venture which is funded through such funds should
have the capability to add value to the investors through relevant returns.
There are a number of measures which can be adopted for improving the efficiency of
crowdfunding and raising the required amount of capital. These campaigns should be
undertaken in a manner which boost the chance of success for the fund raiser. These are also
very important for any economy as it helps in the growth of the start-ups and innovative
ventures. Therefore selecting the appropriate crowdfunding platform is one of the effective
measures to ensure that project will meet the right amount of capital. Finally the success of

the adopted measures should be analysed to determine what improvements are required for
better performance.
Conclusion
Finally, it can be concluded that crowdfunding is one of the innovative methods of obtaining
funds for the projects. It helps to support the innovative activities which are important for the
development of society and develop solutions which can solve the needs of the consumers.
The issues and challenges related to crowdfunding can be mitigated by adopting the right
strategy to attract and pitch the investors. The biggest obstacle which is faced while obtaining
the funds relates to building trust among the investors in the success and the scalability of the
projects.

References
Aldrich, H. (2014). Hackers, Makers, and Crowd Funding: Lowering the Barriers to
Entrepreneurship. Entrepreneur and Innovation Exchange.
Crowdfunding provides a new source of research revenue. (2012). Physics Today.
Hillind, H. (2014). Exploiting the Crowd: The New Zealand Response to Equity Crowd
Funding. SSRN Electronic Journal.
Hillind, H. (2014). Exploiting the Crowd: The New Zealand Response to Equity Crowd
Funding. SSRN Electronic Journal.
Kaplan, K. (2013). Crowd-funding: Cash on demand. Nature, 497(7447), pp.147-149.
Kumar, P., Langberg, N. and Zvilichovsky, D. (2015). (Crowd)Funding Innovation. SSRN
Electronic Journal.
Sarkar, A. (2016). Crowd Funding in India: Issues & Challenges. SSRN Electronic Journal.
Stephen, A. (2017). Prospects of Crowd funding Education: A Conceptual
Framework. International Journal Of Engineering And Computer Science.
Wahjono, S., Marina, A., Fikry, M. and ., A. (2015). Innovative funding solution for special
projects: Crowd funding. Journal of Economics, Business, and Accountancy | Ventura,
18(1), p.65.
Wahjono, S., Marina, A., Fikry, M. and ., A. (2015). Innovative funding solution for special
projects: Crowd funding. Journal of Economics, Business & Accountancy Ventura,
18(1), p.65.