Pros and Cons of Crowdfunding



The Pros and Cons of Crowdfunding

When deciding if crowdfunding is right for you, there is SO much to consider. We’ve broken down some of the pros and cons so that you can be as prepared as possible before your launch.
Pros of Crowdfunding

#1 Little Financial Risk
For startups and entrepreneurs, crowdfunding is often much more cost effective than launching a product through traditional strategies. The crowdfunding model allows founders, inventors, and entrepreneurs the chance to test the market without much financial risk. Technically, you can launch in the idea or a prototype stage without having to worry about mass producing or purchasing inventory.

#2 Centralized Communication
Crowdfunding platforms allow you to communicate with your backers all in one place. It’s a great launching pad to share the brand story and start positioning the overall brand for the marketplace.

#3 Opportunity to Test the Market
One of the best advantages of crowdfunding is the opportunity to test the marketing of your idea or product. The methodology around crowdfunding allows a large group of future customers to believe in and invest in your product. When the funding goal is achieved, there is a high probability that the product will have success in a larger market place.

#4 Keep Your Equity
Unlike traditional investing, when your campaign reaches its goal, and you reward your first customers you won’t have to give up any equity of your company. Instead, you just brought on new loyal backers in your business journey..

#5 Platform Options
There are a ton of different crowdfunding platforms to choose from depending on your campaign needs. At LaunchBoom, we recommend launching on Indiegogo or Kickstarter (who also happen to be the most popular for backers to visit). You can read about the differences in platforms HERE and decide which would best fit your campaign.

#6 Build a Community
Crowdfunding is a great way to start building fans of your product and brand. It doesn’t just provide backers a place to purchase a future product, but also provides a space for your product to generate excitement and build a community of supporters, which will ultimately turn your backers into loyal customers.

Cons of Crowdfunding

#1 Chance of Failure
Successful entrepreneurs don’t always win on their first try. With every set back or unsuccessful campaign, there’s a chance to build resiliency and learn what to do next time. Aligning yourself with industry experts to help mitigate the risks can help enhance the probability of a successful launch.

#2 Resources
Creating a successful crowdfunding campaign is an investment of time and money. There is a lot more that goes into the biggest launches than just throwing together a campaign page and crossing your fingers. Making sure you have a real strategy in place, with real experts on your side can lead to a successful campaign.

#3 Fees
In exchange for hosting your campaign, the major crowdfunding platforms Indiegogo and Kickstarter both take a percentage of your raise. When choosing your platform, you should make sure to consider the fees when thinking about your overall strategy.

#4 Not Suitable for All Businesses
Crowdfunding works best for certain products and businesses over others. Not sure if your idea would fit?
BOOK A CALL with our team of experts – who can help guide you through your crowdfunding journey.

#5 Idea Theft
Don’t let your good ideas get swiped. When you launch a campaign, There is a possibility that someone can come across your page and try to steal your idea, concept, or product – Always work to get copyrights, patents, trademarks as you navigate through this process.

#6 Saturation
Certain projects and campaigns in crowdfunding are becoming saturated – this means you really need to stop and think about whether your idea or product is truly original and has a chance of success.

Key Takeaways: Advantages and Disadvantages of Crowdfunding
There are so many moving parts and things to think about when launching a product or starting a business and the crowdfunding model could be the right fit to help you navigate your entrepreneurial journey.
Our team of experts would love to hear from you and see how we might be able to help. Book A Call Today!