Advantages and Disadvantages of Crowdfunding

What is Crowdfunding?

Crowdfunding is a collection of small amounts of capital from a large number of individuals to finance a new business project.

Community capital calls leverage the accessibility of a broad community network through social media and community-funded websites.

This helps increase business capacity by expanding the number of investors, beyond the traditional range of owners, relatives and venture capitalists.

For large companies, they can easily attract capital from investors or borrow from banks, but for small companies, it is not easy. Calling community capital appears as a solution, helping them overcome financial barriers.

By calling community capital, entrepreneurs have the opportunity to call for hundreds of thousands, even millions of dollars from people willing to invest.

A striking example of the power of Community Capital is the case where a person has appealed for more than $ 55,000 from 6,911 supporters of his potato salad project, far exceeding the original target of only $ 10.

Investors on Community Capital Call platforms can choose to invest in hundreds of different projects for as little as $10.

Calling community capital not only helps to raise capital but also facilitates community interaction and support, while validating business ideas through public interest and investment.

Advantage:

• Diversified Access: Community funding opens up opportunities for access to a large number of investors and supporters from around the world.

• Customer interaction: Provides a great way to interact directly with potential consumers and get feedback on the product.

• Capital mobilization without concession: Especially with equity-based capital mobilization, start-up companies can attract capital without franchising control.

Vulnerability:

• Risk falls short of target: If the funding target is not met, the committed amount may be returned to the investor and you will receive nothing.

• Reputation loss: Failure to 'use' community funding can harm the company's personal or corporate reputation.

• Related Fees: Fees associated with community financing sites may reduce the amount of funding collected.