The Less Attractive Side to Crowdfunding for Commercial Funding
Crowdfunding has become an increasingly popular way to raise money for new business ventures. As with all ideas that take off and attract a lot of people, this method of raising funds to launch a new business or product has its drawbacks. You can avoid some of the top problems that have plagued other would-be business owners, artists, writers, and inventors simply by being aware that these challenges exist.
Confusion About Which Platform to Use
Entrepreneurs have seen the success of some of the original crowdfunding websites like Kickstarter and IndieGoGo and used it to their advantage to create a similar type of site. While some of these smaller sites can be just as effective in helping you meet a fundraising goal, not all of them are reputable. If you plan to use this method of raising funds for your new business, be sure to invest time into researching each one. Keep in mind that the site will keep a percentage of what you take in to cover its own expenses and earn a profit.
Determining Incentives to Provide Your Donors
People investing in start-up organizations know that the owner won’t have much to offer them at first. Some will be content with a small token gift such as a free copy of the product once you develop a prototype and take it to market. Others will be looking for something much more significant such as a financial stake in your future company. Be certain that you are clear with donors from the start to avoid problems such as them pulling back their contributions.
Protecting Your Idea
While businesses can protect others from creating identical products by applying for a patent, you have no such protection this early in the game. When you post on a crowdfunding website, you need to understand the risk of someone stealing your idea and getting it to market sooner than you do.
If you would like to discuss alternatives to crowdfunding as a business financing option, please schedule a consultation with Fintrus today.