Crowd funding
05:08
Over the past few years, crowd funding has revolutionised the entrepreneurship scene. By allowing people to raise large amounts of capital from the wider community, websites such as Kickstarter, Pozible and and Indiegogo are making entrepreneurship more accessible to people from all walks of life.
Crowdfunding encourages people to get more involved in start ups and helps new businesses get off the ground. It allows many more ideas to get funded and the wider public to become investors in ideas and projects that they care about and are interested in. For this reason, entrepreneurs are able to see what the perceived value of their product is before going to production. Will people buy this? Is it worth pursuing? Is there even a demand for it? All these questions are answered before any large amounts of money are invested into the start up. This gives the entrepreneurs a better idea of whether they’re heading in the right direction, or if they’ll need to pivot and try a new approach.
However, while crowdfunding has many positive effects associated with it, there are several negatives that are often overlooked. Firstly, crowdfunding means that a lot of the seed capital used to start up an enterprise comes from the public, not through individual investors. While this does mean that most of the power remains with the entrepreneurs, it can mean that by not receiving as much pointed feedback from potential investors, their business models aren’t as well thought through.
In addition to this, many crowd funders promise ‘rewards’ to their investors, whether it be an advanced sample of their new product or a personalised thank you from the company. Once their project is funded, there is a lot of pressure put on the entrepreneurs to execute their vision quickly, while maintaining a high standard, and distribute it to their investors. Many crowd funded products were delivered later than the promised date to their investors such as the ‘Pebble watch’ and ‘Galileo’, which cast a negative image on these enterprises.
However, this is just a snapshot of the pros and cons associated with crowdfunding. For this reason, it’s important to weigh up these points and to carefully consider your options before taking to the internet to fund your next enterprise.
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