Why Crowdfunding Risks Don’t Outweigh the Benefits
A popular funding option in the digital age is crowdfunding. It has all the romantic elements of a grassroots campaign, combined with the latest high-tech apps and startups to help you gain money and followers quickly. However, despite all the benefits, this type of funding has some major risks and issues that make it an unwise strategy for most business owners.
Crowdfunding is drawing a crowd. In an environment that requires you to stand out and gain popularity, it’s becoming exceedingly difficult to gain attention. There’s thousands of businesses and campaigns on each funding website, which means it’s all-too-easy for your small business, however innovative, to get lost in the noise.
It can be difficult to create a catchy webpage. Your page typically needs high-resolution videos, engaging information, lofty goals and serious promises for all initial funders. All of these strategies may attract a wider pool of micro funders, but most successful businesses typically got their start from a few close, serious investors.
Without the personal touch of face-to-face transactions, many donors are wary of choosing an unknown business. The anonymity created by this online industry can actually cause some potential clients to distrust your overall business model. Most crowdfunding sites require you to give a portion of your proceeds to maintain the platform. Not every funder is aware of this strategy, which can cause further distrust.
Many unscrupulous business owners try to pass scams off as legitimate businesses. However, this practice seems to be even more prevalent online. The additional distance between funder and fundraiser can create additional dishonest business, which can make it even more difficult for you to secure the funding you need.
Of course, there are some positive benefits for crowdfunding. Businesses and personal campaigns have received the funding they need to make a difference in the world. Ideas that otherwise wouldn’t have been funded were given the opportunity to be tested and tried in the real world. This has given some small business owners greater confidence to try their business idea.
However, for a more stable, reliable business strategy, consider more traditional loans and financing. Whether you choose a private lender or a highly regarded bank, these types of financing are time-tested and are more reliable for long-term growth. Don’t let modern trends and catchy funding gimmicks keep you from making wise financial decisions with your small business. One of the best ways to start off on the right foot is to utilize another form of business financing that has a level of stability that isn’t offered from third-party, online funding platforms.