Crowdfunding Is one of those things that sound “too good to be true” and it is, in a way. When crowdfunding is done right, it can be an amazing way to get money for your business or project. When done wrong, it is like anything, it will just waste your time and resources. Don’t get lost in the dream of crowdfunding, look at the realities. Make a sound business decision after assessing the other options before you jump in with both feet. If you jump in, you will need to do research on what crowdfunding platform to use as well and reign in your dreams a bit. Its hard work with a lot of pros and cons, so we have laid out a few of the simpler one’s for you to get you started
There is a lot of money out there
Pro: there is a huge amount of money to be had out there for your business. There have been some studies that suggest that over 50 billion dollars have been raised in crowdfunding, (yes billion). It almost makes you think there is money raining from the clouds and all you have to do is bend down and pick it up.
Con: you still have to find the crowd for raising that money. The platform will help a little, but not enough to make your goals what you want them to be. There is a lot of competition out there. What will make your business or project stand out of the other hundred plus businesses on the same site? Most successful crowdfunding projects have a large seed of people they already know. You have to go out and get it. That means you are going to spend a lot on marketing.
Pro: it’s inexpensive to try out. It really doesn’t cost all that much to start a crowdfunding project and in fact in some sites its free to start it. You can try one and get your feet wet without having to break the bank.
Con: it costs a lot to advertise. You can try it cheaply, but that doesn’t mean if you build it people will come. You need to market your crowdfunding just like you will market any product that will make you money. How much you put it out there will have a direct relationship on how many people put money in it.
Pro: having a crowdfunding project out there gives you some respectability and shows you are serious on trying to move forward. You can send people a link to your crowdfunding platform and the more people that invest, the more others will, as it gives you validation. The more money invested the more chance it will happen and the more chance others will put money in a well.
Con: there are a lot of scammers out there, and even though we know you aren’t one of them, the general public doesn’t know the difference. This has caused a lot of jaded people that used to invest in crowd funded projects to not do so anymore. So make sure that you can support everything you advertise you can do and follow through
Pro: you generally won’t have to give any equity up for the money you raise crowdfunding. This is one of the best parts of crowdfunding. Equity is one of the things we all need to hold onto with both hands, as it allows us a lot more flexibility for later investments into the company or even selling.
Con: it’s a lot easier to just take a check from an investor and give up equity. It’s quick and painless (well painless depending on how much equity they take). Sometimes it just saves you a lot of time and you can focus on getting the business going. It also limits you for getting more capital in from investors at a later date.
Pro: every crowdfunding investor is a potential customer and you can add them to your mailing list. They were interested enough in your project to give you money, so they are definitely interested enough in buying off you at a later date.
Con: there are not that many of them, even a large amount of a few thousand people giving your project money is still a drop in the bucket of what you need. It’s at least a start though
Crowdfunding if done right is a great way to get your business going, but just don’t fall for all the hype out there on how easy it is. It is like anything, if you want to make money it takes a lot of work. That’s why it’s called work. Sometimes it will be more work than its worth, so you have to decide if your project or business is the right one for crowdfunding. Do people nod off when you tell them about your business? If so, then it’s probably not going to be successful crowdfunding. Feel free to dip your toes though and give it a try, there is nothing wrong with trying and not having it work, as you learn each time. Good luck in your business.