Why You Should Not Consider Crowdfunding Your Business

Crowdfunding is an increasingly trendy method for financing unconventional startups. While this innovative means of raising capital remains ideal under certain conditions, there are many reasons to hesitate before attempting to put this platform to good use. Understand what drawbacks come attached with this style of fund seeking before you approach the masses in a public bid for support.

The Notoriety Factor

In business, your reputation is critical, especially when starting out. Unfortunately, many who utilize these sources have ambitions outweighing their ability to follow through. The result is disappointed investors left with unfulfilled promises. Others conduct fraudulent campaigns with the sole intent of stealing donations. Fair or not, businesses are judged according to the company they keep. Allowing your enterprise to become linked with these corporate scoundrels and potentially unprepared entrepreneurs will inevitably work to your disadvantage.

Platform Confusion

From IndieGoGo to Kickstarter, Fundable, and beyond, the internet is ripe with crowdfunding options. Their myriad differences, such as the types of audiences they attract and shifting legal conditions, make determining which one you should select a painstaking challenge. Choosing poorly could be seriously detrimental to achieving your objective.

Lack of Idea Protection

Unlike soliciting investors through private channels, opening up your concept to the entire world is risky. Anyone can snatch your intellectual property and use it for personal gain. When this happens, there is little recourse. Imagine how you would feel witnessing someone else profiting from your spark of inspiration. Your emotional response to this potential scenario should provide a decent indication as to whether this manner of fundraising is something you can reasonably stomach.

Mandatory Buzz Creation

In order for your campaign to find success, people need to be aware of, as well as have excitement for, your plan. Spreading the word to audiences beyond those who visit these sites regularly could prove tricky. You need a series of clever actions to cast a wide net, bringing publicity to your vision and enticing backers from all corners. Unless you are able to stand out among the crowd, your bid runs the risk of losing steam. Failing to reach your goal will leave a bad taste in investors’ mouths, with word of your inability to seal the deal spreading quickly.

Crowdfunding makes sense under particular circumstances, but significant hurdles make securing cash via this strategy problematic. Carefully weigh the benefits against the drawbacks before using this newly designed financial instrument.

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