Crowd funding: Can this overcome the funding challenge?

The major challenge for every average entrepreneur is securing funds to finance a business idea. The banks are reluctant to give loans; possibly because they are afraid the loans may become homing pigeons. Family, relatives, friends think the ideas are not worth their money. And you don’t have enough to even set the business idea in motion. Frustration sets in and the idea dies. This experience is common and proves that absence of funding is largely responsible for the dearth of entrepreneurs.

In recent years, crowd funding seems to be gaining traction as a credible solution to the challenge of funding for start-up ideas. What is it all about? Are there any demerits or challenges with this funding mechanism?

Start-Up Digest sought for clarifications. Read and be informed

Crowd funding is asking a crowd of people to donate a defined amount of money for a specific cause or project in exchange for various rewards.

There are three general categories crowd funding can fall under: Equity, Donation, and Debt.

Equity-based crowd funding is asking a crowd to donate to your business or project in exchange for equity.

Donation-based crowd funding is asking a crowd to donate to your project in exchange for tangible, non-monetary rewards such as an ecard, t-shirt, pre-released CD, or the finished product.

Debt-based crowdfunding is asking a crowd to donate to your business or business project in exchange for financial return and/or interest at a future date.

The Good

•Crowdfunding is useful for a variety of opportunities, whether fundraising for disaster-relief, creative projects, creating a salable product, or creating a start-up.

•Crowdfunding platforms allow you to market your project, generate interest, and receive funds.

•Crowdfunding backers can provide useful feedback about your project.

•Once you get a solid base of support, there is no limit to the amount of projects you can fund.

The Bad

•Crowdfunding your project exposes your ideas to potential copycats.

•Crowdfunding platforms may limit the amount of funds you can receive.

•Crowdfunding regulations and taxation can be difficult to work with.

The Excellent

•Crowdfunding is not limited to certain kind of project, there is no discrimination! Only great ideas!

•Crowdfunding can be fast, efficient, and effective if done right.

•There can be little risk involved compared to other business ventures.

•The more creativity and fun you have, the more likely you’ll get funded.

IKENNA OBI

Source: dailycrowdsource.com