Gone are the days when one had a start-up idea but could not bring it to reality because they did not have access to the required capital. With the emergence of the concept of crowd funding, it is possible for everyone who has an idea worth investing in to get the necessary funds and make their ideas come true. This has come as a reprieve to many entrepreneurs especially those with digital start-ups which require a lot of capital to establish.
Benefits of crowd funding
Other than access to capital, the concept of crowd funding has several benefits. It will serve as a marketing tool for the start-up since people will get to know the idea long before the final product is out. This is a great way to pre-sell a product that is yet to be produced.
By the virtue of the fact that an investor agrees to provide funds for the start-up, this provides an early validation of the concept, as the investors are convinced that it has the potential of being successful hence consenting to provide the funds for its implementation. The other advantage of crowd funding is that it’s free and it’s far easier than the traditional methods of applying for start-up funds. With the massive resources in the internet, it costs nearly nothing to float an idea worth investing in to millions of potential investors who would be interested in providing the capital.
But the concept also has its demerits. The first one is theft of ideas. When you expose your idea to a group of total strangers, it is easy for someone to steal it should they see it viable and since they have the capital which you don’t have, they can go ahead and implement it and reap the benefits ahead of you. The other pitfall is that it’s not a method that can be used for long term funding. It’s only suitable for start-ups and it can’t be relied upon for continuous generation of cash flow. Keep these points in mind however and it can be an incredibly useful tool for the launching aid of a new venture or product.