Advantages and disadvantages of crowdfunding financing model

Advantages and disadvantages of crowdfunding financing model

The emergence of crowdfunding financing model has changed the way investors invest, so that more investors can also participate in entrepreneurial projects. So what are the advantages and disadvantages of the model?

Advantages of the crowdfunding financing model

First, the threshold of entrepreneurship is low.

Now many of the crowdfunding sites main selling point is? Round the entrepreneur's dream? The subtext of this sentence is ? Before the high threshold of entrepreneurship, crowdfunding to help you lower this obstacle? From the actual case, micro-venture capital does help many grassroots entrepreneurs to raise funds, and launched the established products. This process will be more difficult if you take the traditional financing route, because vc may not be optimistic about your idea, besides, you don't have the product to do it, it's hard to get vc's recognition.

2. Crowdfunding gets you a market research report in addition to money.

The reason is simple, because the money is directly from the consumer, the consumer's recognition and evaluation of your product is a market research, can reflect to a certain extent your product in the future after a wide range of market results. One of the hidden values of the crowdfunding model is that it allows consumers to pay for the product before manufacturing it. If the project is successful, and the actual R&D and manufacturing process goes smoothly, then this is a great way to minimize the cost and risk of starting a business.

Three, crowdfunding is a good advertising platform, which is reflected in two points.

First, your project financing success, which is equivalent to an advertisement to the public. Some people see your project but do not contribute funds, probably because he can not judge whether your product must be able to finance enough money to mass produce out. But after seeing others flock to help you get the money together, they will become your future customers.

Second, whether or not the financing is successful, your project has been shown. To whom, to potential investors to see.

Disadvantages of the crowdfunding funding model

First, it creates pressure to produce.

According to the general rules of crowdfunding platforms, if your project is successful in raising funds, it is necessary to complete the development and manufacture of the product within a specified period of time to fulfill the promise to the backers. So while crowdfunding allows you to raise money, it also puts pressure on you to place orders. This is because the money comes from the consumer end, which amounts to direct ordering. This pressure especially manifests itself in physical product projects.

II. Crowdfunding lacks entrepreneurial guidance compared to traditional vc.

Traditional vc are ?

Traditional vc's are?

Traditional vc's are all? In short, your backers on a crowdfunding platform are unlikely to be able to provide you with uniform, constructive' advice. A good vc can help you take a lot less detours, especially in the promotion phase of your product. You may be good at R&D, but not necessarily at selling.

Third, investors on crowdfunding platforms are not specialized enough.

Crowdfunding platforms can help you quickly raise money for product development and production, but they can't guarantee that your funding chain will remain intact in the future. After traditional vc's provide early investment, you still have the opportunity to get subsequent rounds of a, b, and c financing if the project develops well. And on a crowdfunding platform, those backers of yours are likely to have long since turned their attention to other novel inventions.

In short, the emergence of crowdfunding financing model has changed the way investors invest, so that more investors can also participate in entrepreneurial projects. Solve the financing difficulties of small and medium-sized enterprises at the same time, for investors also greatly reduce the risk of investment. Nowadays, equity crowdfunding involves a lot of legal issues, and some of its operation modes may not be in line with the provisions of the current law in the legal ambiguity, but equity crowdfunding is undoubtedly one of the four crowdfunding modes with the most charismatic mode, and it also represents the direction of the development of crowdfunding. Only prudent supervision, make good use of the institutional norms, equity financing platform is very promising for future development.

The significance of crowdfunding

Crowdfunding is not a simple investment behavior, but a kind of capital, cognitive, time surplus elite community members to collaborate with each other to enhance the value of each other's projects, the final profit point is also diversified, in addition to the real monetary gains, community members of each other's value exchange and contacts, resources, experience and other hidden enhancement is also the key, community, and crowdfunding if combined well. If the combination of community and crowdfunding is good, it will produce a win-win effect that 1+1 is greater than 2. The essence of crowdfunding is to raise people, raise wisdom, raise power, raise money, from the ladder point of view, raise people is the first, raise money is the last.

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