Sunday, June 5, 2016

Crowdfunding, its Advantages & Disadvantages – GEC Business Review


Thinking about starting or expanding your business but you are unable to secure a bank loan or convince angel investors and venture capitalist (VCs) to support your plan?

In nowadays business climate, crowdfunding is actually a soothing alternative way (to bank loans) to fund your new idea and venture without giving up equity, diluting share or even building up debt. Many crowdfunding platforms allow entrepreneurs to raise funds in exchange for giving their tangible products or other related gifts. If you are considering raising fund for your startup, project or venture through crowdfunding, there are a number of top factors we observed that you need to consider. 

ADVANTAGE 1: Access to Capital Instantly
Crowdfunding can be a faster way to raise fund for your idea or venture with no upfront fees. Moreover, ideas or ventures that may not appeal to conservative investors can get funded more easily, regularly.

ADVANTAGE 2: Awareness Creation
Pitching an idea or business through the crowdfunding platform can be a valuable form of marketing even before your business launch, and may result in media attention if it is exceptionally unique in a way.

ADVANTAGE 3: Valuable Feedback 
Crowdfunding is a good way to test feasibility of your idea or product through reaction of the public. That said, it should be a good sign if more investors are keen to invest during the crowdfunding campaigns which tend to be relatively short.

DISADVANTAGE 1: Negative Impact
A failed crowdfunding project may ruin the reputation of your project or business, moreover, if you are unable to reach your funding target, any funding that has been pledged will generally be refunded to your investors and you will receive nothing in the end.

DISADVANTAGE 2: Risk of Being Imitated
Based on our observation, many startups ignore the protection of their business/product name, slogan and idea with a trademark or patent; there are risks if someone may see it on a crowdfunding site and quietly steal your concept.

DISADVANTAGE 3: Rewarding too Much
Simply committing rewards or payback wrongly without appropriate business planning and financial forecast can mean giving away too much of the business to your investors. What’s more, you may also be accused of breach of contract or mismanagement.

**About GECB
GECB is a Malaysian-based SME & Startup consulting firm headquartered in Kuala Lumpur. Since inception in 2003, the company has been pioneering professional business plan and company profile services in Malaysia, and has assisted many local and overseas SMEs, large corporations and government agencies to grow business. For more info, please contact +603 2715 4356 or +6017 330 8077 and/or email today.


Robert Hall said...

Crowdfunding is that helps the organization in making awareness about the item furthermore a free marketing effort in light of the fact that a fruitful crowdfunding venture can guarantee that organization can create enough features to make purchasers inquisitive about the item which it will offer which thus can prompt to effective launch and acceptance of the item by the consumers.

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