Challenges of CrowdFunding – Part 1

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The prospect of investing in crowdfunding is no doubt very attractive and appealing. It can be a very rewarding experience to invest in startups and early stage companies. This can only happen if you can identify a good startup before it becomes a sensation to the general public.

There is another side of the picture that this chapter will paint for you. It is not intended to scare you or cause you to panic. The intention is to give you a balanced view of crowdfunding that will surely help you to make informed decision if you need to venture into the world of crowdfunding.

It is a well known fact in investment circles that investment in early stage companies or startups are risky despite the potential gains. There is every possibility that the business may not take off. Even when it takes off on schedule, it may not withstand the initial storms of business cycle. The implication is that you might lose all your investments. It is widely speculated that 50% of new companies fail within the first year.

Website design for small businessIt is therefore very important to have an investment strategy that will help you identify your investment psychology. If you a risk averse investor, then you may need to rethink if crowdfunding is your type of game. If your risk appetite is good and you have the capacity to tolerate volatility and instability in small caps investment, then get on the wagon. In all situations, you will need a need a solid plan to map out your investments route.

There may be some false notions that crowdfunding means getting easy money for any untested business. Undiscerning investors also think that making money through social lending is a free as a breeze. It is not exactly so. Crowdfunding is not all comers game. It requires a lot of work, and there is no guarantee that all efforts may amount to anything tangible or even success. It is not a get rich quick scheme, neither is it an ad-hoc funding arrangement.

In some circles, some people are touting the impression that anyone with a supposedly great idea can throw it at crowdfunding platform and before you can click the Submit button on your computer, donors and investors are already falling over the offer. While that may have happened in few cases, it is hardly a general experience.

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