It would be best to understand the pros and cons of crowdfunding before you opt for this choice as an entrepreneur. The advantages and disadvantages of crowdfunding 
may either lead you in a different direction or solidify your intention that this is the best path.
We provide this brief guide to the pros and cons of crowdfunding, and of course, you can always contact us to talk about your specific project and how each of these areas would impact your plans. We never charge for an initial consultation, and most of our subsequent connection services are free.
Pros and Cons of Crowdfunding: Pros
We start our exploration of the crowdfunding pros and cons by going over the pros. Many shy away from the idea of crowdfunding for various reasons, many of which are not based on the reality of how valuable and effective this alternative form of funding can be. However, as with any new financial instrument and less regulated financing method, it is unsurprising to see that kind of hesitation and concern.
Crowdfunding Pros List
- Crowdfunding can pay off. You can get money that truly moves the needle for your company or project and is well worth whatever debt or equity you give up.
- Crowdfunding can fund something less traditional than bank loans will fund. “Personal loans” have fallen out of favor with banks, and those who do offer them charge very high rates and restrictive terms. Even if you do qualify, you may find that traditional personal loans are too difficult to get.
- Crowdfunding can be quite fun. You develop a relationship with the crowd or the peer who gave you the investment, and it can be rewarding to have people genuinely interested in your project or your idea. Usually, you and your project have been specifically chosen; therefore, there may be more genuine interest than you’d find with a bank loan.
- Crowdfunding sites can be fun to browse to see what else is being funded and what else is out there. You can feel a part of a community of people pursuing crowdsourcing and see what others are being funded for. We hope that many who receive crowdfunding become investors after they are successful.
Crowdfunding may not be for every purpose and every investor, but the advantages are enough to make this kind of funding quite profitable for the crowd and also quite helpful to the person. StartupNation provides more detail about the advantages of crowdfunding.
Pros and Cons of Crowdfunding: Cons
Crowdfunding has many advantages but is not perfect or would be more mainstream and popular. So, as a comprehensive, balanced, and independent site, we also want to cover the disadvantages as we explore the pros and cons of crowdfunding. The main crowdfunding negatives you could run into include the following factors.
Crowdfunding Cons List
- The investor could decide to stop paying out the crowdfunding money as promised. Check the small print in the contract, and you’ll see that there are likely ways that the lender can stop paying for sure, sometimes quite loose, circumstances.
- The crowdfunder could reject your request for the next stage of funding. There is often a lot of leeway built into crowdfunding agreements because you have to continue to justify both your need and the financial potential of your project.
- Your situation changes, and your project gets delayed or does not go smoothly. Again, with traditional loans, the money is likely already in the bank, and in some cases, the bank does not care if your project does not finish – they loaned you the money on your creditworthiness and built risk into the interest rate. With crowdfunding, your investors may be much more sensitive to the possibility that you will not finish on time.
- You want to change some aspects of your project, but in some cases, those behind your crowdfunding can reject your request for modification. With a traditional bank loan, as mentioned above, you will get the money almost no matter what, and as long as you spend it on its generally intended purpose, you will often get no argument from the lender.
These are the main crowdfunding negatives. As you can see, they may or may not be enough to dissuade you from going the crowdfunding route or overcome the advantages.
Fox Business goes over some disadvantages of crowdfunding.
Pros and Cons of Crowdfunding: Both
The pros and cons of crowdfunding are often quite straightforward. However, sometimes, whether or not to join the crowd and invest in crowdfunding or try to attract crowdfunding is not clear. Some factors affect the crowdsourcing pros and cons.
Pros and Cons of Crowdfunding: How the money is dispersed
Crowdfunding opens the door to creative ways that funders can get their money to the person who needs it. Unlike traditional funding sources, crowdfunding may have funds come in parts decided by ongoing milestones, specific successes, 
or periods that relate to the project. You may not get all the funds you need upfront, but on the other hand, some variability in how much you earn – perhaps in a good way – might be built-in. With traditional funding, you know exactly when you will get your money, usually upfront.
Pros and Cons of Crowdfunding: Information
With traditional loans for schools or small businesses, you are all set and usually approved initially. However, you may need to provide information about your progress with crowdfunding. This is not necessarily a bad thing for everyone, though, since it can make the crowdfunding experience feel more personal and rewarding, and it can also help lead to funding for the next step in your journey. Even the money you get upfront can require substantial information so that the crowdfunding investor can decide how likely you are to pay the loan back under the terms offered.
Building a Supportive Crowd
Using crowdfunding to build a large group of people who support and are excited about your project can be very good. Engaging these people can lead to free marketing and PR as they use word-of-mouth, including social media, to promote your project. However, this also may mean that you have a large group of investors who may have questions, want to give feedback, and press you to meet each of your timeline goals. That can sometimes feel overwhelming and even intrusive. Building a supportive crowd is mostly a good thing, but we list it in this “pros and cons of crowdfunding: both” section because there are some drawbacks.
Our Work
Crowdfunding has advantages and disadvantages that must be considered before you put your product or company out there. And in some cases, some factors may fall into both categories or be hard to assess. You need to know how to proactively address the advantages and disadvantages of crowdfunding to maximize the former and minimize the latter. Choosing the best platform, designing a great pitch, and carefully determining the terms are all essential steps, and our services are available for all of them.
We hope that this brief overview of the pros and cons of crowdfunding was helpful, and we invite you to contact us to discuss this topic in relation to your specific project further and see whether our investor and platform connection services are right for you.
