Pros and cons of crowdfunding platform

Crowdfunding is such economic and efficient platform which assists you to raise money for the ideas and good causes quickly. But, there are some pros and cons of using the crowdfunding platform for both fundraisers and investors. Let’s see each one in detail.

Pros of crowdfunding platform

Crowdfunding platform provides many beneficial factors from the perspective of fundraisers for raising capital to develop the idea as a successful project. It assists them to achieve their ambition without any hurdles. We shall have a look at three most important advantages of using crowdfunding platform with respect to the fundraisers.

Easy method for raising funds

Basically, raising initial capital for the ideas is the toughest task. But, crowdfunding platform is the effective method to raise funds for the innovative idea and social causes. It minimizes the time and work which are required for the bank, when the fundraisers are applying for the loans to get capital for constructing their business. It saves time and additional cost associated with the projects rapidly.

Avoid risk

Starting up a business or introducing a new kind of innovative products/projects is the risky journey. There are lots of expenses the entrepreneurs have to face while developing a business idea. But, by using the crowdfunding platform, they can raise money for transforming the idea into a full-fledged project. It hedges the financial risk greatly and other emergency situation smoothly.

Act as a marketing tool

Marketing the idea of products or projects even before it is launched in the global world is a difficult task. But, now it is a simple task with the help of crowdfunding platform. Fundraisers can easily reach numerous target audiences for explaining their ideas to raise funds.

Many crowdfunding platforms also provide the fundraisers with social media network options. It is the revolutionary tool which helps them to get larger exposures for their idea. They can share their ideas on many social media and attract lots of backers to support them financially.

There are also some more advantageous parts available on the crowdfunding platforms with respect to the backers who gives the financial support to the people who are in need of funds. Let’s see the beneficial aspects of the investors.

Remuneration for funding

Different crowdfunding platforms provide various kinds of benefits to the investors. If it equity based crowdfunding websites the backers, will receive the financial returns like dividend from the company, becoming the shareholders of the company and getting the voting rights to take decision for certain issues.

Crowdfunding platform may be donation based, then the backers will get intangible or non-financial returns as rewards for pledging their money for the charity purpose or any good causes. Those returns are free tickets for musical shows, concerts, credit lines about the investors, discounts and cheaper price for the products.

All-or-nothing model

This model gives the guarantee for the investors who are pledging their amount for the social causes or innovative idea. Whenever a backer invests the money, the crowdfunding platform will hold all the money till the end of the campaign is completed successfully.

 It releases the money to the fundraiser when he or she completes it otherwise the respective amount will be transferred back to all the backers. Safety in investment encourages more backers to fund the money for the innovative ideas.

Cons of crowdfunding platform

Till now we have discussed about the advantages of the crowdfunding platform with respect to both the fundraisers and backers. But, there are also a few drawbacks for displaying the ideas in the crowdfunding platform. Here are the disadvantages of using the fundraising platform for corralling the money.

Disclosing the idea

When the entrepreneurs post their ideas to the online world for raising funds, there is a possibility for other people to copy the ideas from the crowdfunding platform. But, they have a solution to protect their ideas securely. It is none other than, by getting copyrights before displaying the idea to the external world.

Miss the learning process of convincing the investors

In ordinary method, the fundraisers will seek the investors in person and request for financial assistance for developing their projects. But, with the assistance of crowdfunding platform, they are getting the investors for backing their project easily. This way, they are missing out the opportunity of learning how to handle the situation with the investors and convince them to invest in the project.

All-or-nothing model

This model has little consequence with respect to fundraisers that the amount will be transferred to their account only when they complete the projects profitably. This can be easily resolved if the fundraisers act more responsibly while working on the project.

Crazy ideas get funded

Millions of ideas are getting funded through crowdfunding platform, but all are not reaching its success within the stipulated time period. Backers who are investing their valuable money and time in the idea which they think it is worth enough to be funded. If it failed to reach the goal, they will get dissatisfied with the fundraisers. This leads to the decreased rate of investment for the projects.

Final words

Fundraisers and backers are the two different poles, where the backers get attracted towards the ideas generated by the innovators is popularly known as crowdfunding concept. While choosing the appropriate crowdfunding platform, every fundraiser has to keep in mind about all the pros and cons of listing their idea into this platform. They also have to take necessary steps to avoid the risk and complete the project successfully. Likewise, investors should have caution before funding their money to the projects with all the above discussed benefits and drawbacks in the crowdfunding platform.