Crowdfunding pros and cons, knowing what to expect can make the difference between a successful project or failing campaign.

Crowdfunding is a popular and sometimes fun way to raise money for your startup, or if you are established, put the feelers out for a product you think your followers might just enjoy. The steps are simple when you put them on paper: just start up a campaign with a quality platform, tell everybody what you need, go through a few more pages, and BAM-the campaign has begun, and the donations start rolling in.

Well, it’s not really all that easy. You have to have a strategy and a plan, and in this article, we are going to discuss the crowdfunding good and bad. This way, you know what to expect as you get started on this journey.

Pros and Cons of Crowdfunding: The Rewards

If you’re familiar with sites like Indiegogo or Kickstarter, you know that these are platforms that offer rewards when you back a project. These rewards are incentives to the backers for doing their good deed and pledging money.

On paper it sounds simple. Post the funding needs and then tell everybody the cool stuff they get. Two simple ingredients that lead to a successful fundraising campaign and money in your business account. But getting hundreds or even thousands of folks to donate to your project will require that you have the skill to plan and execute a successful marketing campaign; it’s one of the crowdfunding pros and cons.

Here’s the steps:

  1. Establish the funding goals. How much can you raise with your campaign? Some platforms are all or nothing. This means that if you do not raise ALL of your intended funds, you don’t get to keep a penny of them.
  2. Create a reward plan. Giving the correct reward, one that is commensurate with the amount of money donated, can be what makes or breaks your goal. Create rewards that fit with smaller donations and really special ones for the larger donations. You have to figure out what makes your donors tick and what will motivate them to give, but not in a way that makes you go broke.
  3. Get on a crowdfunding platform. Create an informative video that tells people what they are funding. Then show off the rewards. After that, publish them on an appropriate platform. One of the crowdfunding pros and cons is that you have to find the right platform.
  4. Use Social Media. The strength of your social media outreach will play a huge role in how successful your campaign is, so get posting, sharing, tweeting and talking.
  5. Get ready. Be prepared to deliver the rewards if you hit your target. Your backers have been good to you, so be good to them.

Pros of This System

  • One of the crowdfunding pros and cons is that you get access to “free money”. That term is loose because nothing is free. You raise money without selling equity stakes. These are donations you get and a chance to create loyalty to your brand.
  • Another crowdfunding pros and cons is that you’ve already created some takers for your next project. Some people will be right on board for your next venture, even if they don’t necessarily need it! They will just enjoy supporting you.
  • You can use this as a low risk way to see what the interest is in a product, you’re interested in selling or producing. If it’s a total flop, you aren’t out any money.

Cons of This System

  • If you don’t work well under pressure, be warned. Crowdfunding good and bad dictate that you have to prepare and ship whatever it is you told your backers you would provide, so the clock is ticking. Get that stuff made up and sent out ASAP. Even though the top campaigns struggle to meet deadlines, you should do your best to be on time.
  • Lots of work, little pay. You might spend a ton of time running a campaign that ultimately does not meet the goal. No funds may be received after all. It is a risk.
  • Rules, rules, rules. If your project is deemed questionable by the platform or contains material that is, well, NSFW, it might not make the cut and you will have to get funding elsewhere.

Crowdfunding Pros and Cons: Equity Crowdfunding

Unlike rewards-based crowdfunders, equity crowdfunders provide you with money in exchange for a piece of your company.

Pros: Equity Crowdfunding

  • Smart Investors. Equity crowdfunding has opened its doors to this type of investing to more and more people. These are investors who are accomplished and know the game of investing, and whose contribution can really add to the long-term success of your business.
  • Easier Relations. If you have numerous investors in your company that you have to manage, it becomes very time consuming. Instead of raising the money from numerous places, some of these platforms simply pool the money they raise into one single investment, which makes you have to worry about just ONE point of contact instead of many.

Cons: Equity Crowdfunding

  • Transparency is Increased. It’s not easy for all entrepreneurs to post their business and financial dealings online for all investors to poke at. Becoming comfortable with this form of crowdfunding means you have to be okay with increased transparency about what your business is doing financially.
  • Pricey fundraising. Giving away a piece of your company when you could potentially expand it for donations is a question that is not always easy for entrepreneurs to answer. Giving away a part of your livelihood is only great if you get something really good back-like an experienced investor who takes interest in your industry and perhaps your company, for example.

Conclusion

Our bottom line is this: crowdfunding pros and cons are numerous, but don’t let them stop you from trying. You have many platforms to choose and we would be glad to have you at CrowdfundingBum. Heck, we make sure the campaign is written well and attracts visitors, so don’t worry about marketing. We even have built in backers, so let us help you succeed today.

Final thoughts.

We hope you stick around a while to find out more about all that Crowdfunding Bum has to offer. You will find ample reasons to choose us as your funding source.

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