Hype About Crowdfunding Is Too Good to Be True

Photo By martinprint.

Photo By martinprint.

BY DAVID NILSSEN

Why I Think the Hype About Crowdfunding Is Too Good to Be True

Crowdfunding in one form or another has been around for years but has become a sexy buzzword of late. The majority of news articles about it are positive, to the point where many seem to view crowdfunding as a cure-all for small-business funding woes. But this hype has clouded a number of pitfalls both entrepreneurial hopefuls and prospective investors need to be made aware of before jumping on board.

Crowdfunding has little application to business unless an entrepreneur only needs a small amount of money to get started. For projects requiring $5,000 or less, for example, it may be the right route. But for anything larger — especially where the total investment is in the tens of thousands or greater – it usually won’t suffice. Small amounts of capital can certainly help start a business initially but most will need to be recapitalized. Unfortunately, subsequent capital is not as easy to secure as some would assert.

That means that many of these “crowdfunded” businesses are often severely undercapitalized and that could translate to dramatically lower success rates. Some reports show crowdfunded businesses fail at a higher rate than other small businesses. As more crowdfunded businesses fail, fewer entrepreneurs will trust its model and regulations may be implemented. Companies requiring large amounts of capital will likely continue to seek traditional funding or forms of alternative funding.

Related: Take a Step Back. Set a Realistic Goal for Your Crowdfunding Campaign.

Read more: http://www.entrepreneur.com/article/231046#ixzz2rrtJU5BG

 

 

 

 

 

 

Read more: http://www.entrepreneur.com/article/231046#ixzz2rrt2xZEu

Tags: , , , , ,

HEADLINE NEWS

This RSS feed URL is deprecated, please update. New URLs can be found in the footers at https://news.google.com/news [...]

NPRAfter Outcry, Crowdfunding Site Patreon Backs Off Plan To Raise ...NPRThe popular crowdfunding service Patreon has backed off plans to change its payment structure, after widespread, vocal and passionate opposition from creators and their fans. Last week, the site announced it woul [...]

TechCrunchHow hate speech crowdfunding outfit Hatreon crept back online ...TechCrunchIf you want to make a living creating white supremacist content, you're probably not going to do it via sites like Kickstarter and Patreon, which prohibit hate speech. Fortunately there's Ha [...]

EntrepreneurWhy Some Small Business Owners Are Turning to Crowdfunding to Save Their CompanyEntrepreneurMany owners of beloved local businesses, especially in pricier cities, have been forced to swallow their pride and appeal to their customers in times of crisis -- a process streamli [...]

CoinDeskKickstarter ICO? Don't Count On It Says Crowdfunding Leader ...CoinDeskThe company most widely associated with crowdfunding, Brooklyn-based Kickstarter, has no plans to get into the initial coin offering (ICO) business. Coming in response to the news yesterday that compet [...]

ForbesCrowdfunding Do's And Dont's From iFundWomen's Karen CahnForbesDuring our conversation, she was transparent in sharing that her first software company, VProud, failed because she “did everything backwards” and spent too much time trying to perfect the product. “Pe [...]

CryptoCoinsNewsCrowdfunding Giant Indiegogo Looks to Make ICOs MainstreamCryptoCoinsNewsCrowdfunding platform Indiegogo has a plan to help initial coin offerings (ICOs) break into the mainstream, even as the U.S. Securities and Exchange Commission (SEC) is ramping up its oversight of [...]

BBC NewsWu Yongning: Who is to blame for a daredevil's death? - BBC NewsBBC NewsLast month, Wu Yongning went out to do what he loved best - scale a skyscraper without safety equipment and film himself dangling off its roof by his fingertips. What happened next almost seems inevit [...]

TechCrunchFormer Gawker employees are crowdfunding an effort to buy Gawker.comTechCrunchWhile Univision acquired most of Gawker Media's sites last year (and renamed them as the Gizmodo Media Group), the deal didn't include Gawker itself. In fact, BuzzFeed reported last month [...]

NPRCrowdfunding For French CastlesNPRYou too can own a French chateau, in part, anyway. Romain Delaume, CEO of Dartagnans, tells NPR's Scott Simon about a crowdfunding effort underway to preserve La Mothe-Chandeniers. SCOTT SIMON, HOST: What if I told you that for about $60, you [...]

CFB Finance

Marketwired

  • Crowdfunding
  • Crowdfund
  • Peer to Peer Lending
  • FinTech
  • Reg A+
  • Reg CF
  • Crowdfunding USA

Press Release

Live Crowdfunding .tv

What's Next Step in Regulation A+ JOBS ACTS Title IIII :L Interview : Steve Cinelli with Brian Korn Securities and Crowdfunding/Peer-to-Peer Lending Lawyer, Watch more video library | Conference | Interview | Campaign Showcase | Research | Education |