Using crowdfunding sites could destroy a nascent business idea

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Before using crowdfunding sites, businesses need to protect their intellectual property from copycat imitations

Entrepreneurs are increasingly using crowdfunding platforms to pitch their ideas to a wide audience in the hope of getting potential investors to contribute finance. Yet, for certain ideas, pitching on crowdfunding platforms could be fatal to setting up a viable business.

Crowdfunding sites such as KickStarter, have grown in popularity. The concept is simple – you have an idea, formulate the logistics of the plan, and then upload the idea to a crowdfunding website, where millions of potential investors can scrutinise it, and if they like it, pledge to invest in the project. If the project raises the target capital, the funds are automatically transferred, and the idea becomes a reality. If the target is not met, no money is transferred, so no investors lose out. Essentially it’s Dragon’s Den for the internet generation, leveraging the almost perfect liquidity of the online marketplace.

While this might be a viable option for certain business ideas, there will be others which should stay away from crowdfunding platforms in their early stages. For example, a product-based concept such as Mandy Haberman’s Anywayup Cup could not have succeeded had she not patented the cup before going to market. As it was, she had to fend off copycat products through litigation in the courts. Without a patent, it would have been impossible to compete against well-resourced manufacturers.

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