The concept of crowdfunding Advantages and disadvantages of crowdfunding

The concept of crowdfunding Advantages and disadvantages of crowdfunding

Compared with traditional financing methods, crowdfunding is more open, and whether to obtain funds is no longer based on the commercial value of the project. So what are the advantages and disadvantages of crowdfunding?

First of all, the concept of crowdfunding

Crowdfunding financing refers to the financing method of raising a small amount of funds for the project sponsors to engage in a certain venture or activity through the network platform, and the project sponsors provide certain returns to investors.

Second, the classification of crowdfunding

Crowdfunding platform plays an intermediary role between investors and project sponsors, enabling entrepreneurs to raise funds directly from fund providers who approve their business or activity plans. According to the different ways of return, crowdfunding financing can be divided into the following two categories: one is to return the equity or future profits of the investment object; The second is to return the products or services of the investment object.

Third, the advantages of crowdfunding financing model

(A) low threshold for entrepreneurship

One of the main selling points of many crowdfunding websites now is "the dream of a round entrepreneur". The subtext of this sentence is "In the past, the threshold for starting a business was high, and crowdfunding helped you lower this obstacle." From the actual case, Breeze Investment has indeed helped many grassroots entrepreneurs to raise funds and launch established products. If you take the traditional financing route, this process will be more difficult, because vc may not be optimistic about your plan, and it is difficult for you to get vc's approval without products.

(2) In addition to funds, crowdfunding also has market research reports.

The reason is very simple, because money comes directly from consumers, and consumers' recognition and evaluation of your products is a market survey, which can reflect the results of your products after they are put on the market on a large scale in the future to some extent. A hidden value of crowdfunding model lies in: let consumers pay money first, and then make products. If the project financing is successful and the actual R&D and production process are smooth, then this is equivalent to greatly reducing the cost and risk of starting a business.

Crowdfunding is a good advertising platform.

First, your successful project financing is equivalent to making an advertisement for the public. Some people see your project but don't contribute, perhaps because they can't judge whether your product has enough funds to put into mass production. But after seeing others rushing to help you collect money, they will become your future customers.

Second, whether the financing is successful or not, your project has been displayed. To whom? Potential investors.

Fourth, the shortcomings of crowdfunding financing model.

(A) resulting in production pressure

According to the general rules of crowdfunding platform, if your project financing is successful, you must complete the product research and development and manufacturing within the specified time, and realize the commitment to the supporters. So crowdfunding brings you order pressure while raising money. Because the money comes from the consumer side, it is equivalent to placing an order directly. This kind of pressure is particularly obvious in physical product projects.

(B) Compared with traditional vc, crowdfunding lacks entrepreneurial guidance

Traditional venture capitalists are "experienced people", or have their own entrepreneurial experience, or have extensive industry contacts and observation accumulation. In short, it is impossible for your supporters on the crowdfunding platform to provide you with unified and constructive suggestions. A good vc can help you avoid many detours, especially in the promotion stage of products. You may be good at research and development, but you may not necessarily be able to sell it.

Investors on the crowdfunding platform are not specific enough.

Crowdfunding platform can help you quickly raise funds for product development and production, but it can't guarantee that your future capital chain will remain intact. After the initial investment provided by traditional vc, if the project develops smoothly, you still have the opportunity to obtain the subsequent A, B and C rounds of financing. On the crowdfunding platform, your supporters may have turned their attention to other novel inventions.

Generally speaking, the emergence of crowdfunding model has changed the way investors invest, so that more investors can also participate in entrepreneurial projects. While solving the financing difficulties of small and medium-sized enterprises, it also greatly reduces the investment risk for investors. At present, there are many legal issues involved in equity crowdfunding, and some modes of its operation may not conform to the provisions of the current law and are in a vague area of the law. However, equity crowdfunding is undoubtedly the most attractive of the four crowdfunding modes, and it also represents the development direction of crowdfunding. Only by careful supervision and good use of institutional norms can the equity financing platform have a bright future.

Verb (abbreviation of verb) crowdfunding website case

"Everyone voted" for grassroots angels to invest in the physical store around them, a network platform focusing on equity crowdfunding in physical stores. Everyone invests. For good projects, professional everyone invests in the operation team and the promotion team to finance the project and package and promote it. For investors, Renren's investment projects are mainly aimed at the shops around them. The store has been open for a long time, its business is booming, and it has certain customers and popularity. The project party must also invest to open branches, and the investors and the project party share the risks. At the same time, Renren Investment cooperates with third-party payment platforms to manage project financing funds.

Different from other crowdfunding website models, Renren's equity investment crowdfunding platform has no leading investors. This model is more like a few unknown friends opening a branch together. After the investor authenticates the investor on the website, he shall make an appointment to subscribe first. After the project financing is successful, the next round of offline roadshows will be held to allow the project and investors to communicate face to face.

After a series of project docking, Renren Investment website has higher requirements for project audit and more serious certification for investors, and strives to become an example and pioneer of Internet equity crowdfunding. At this stage, domestic crowdfunding projects rely largely on honesty and self-discipline, and everyone invests to build such an honest platform.

Sixth, the characteristics of crowdfunding

1, low threshold: regardless of identity, status, occupation, age and gender, as long as you have ideas and creativity, you can initiate a project.

2. Diversity: The direction of crowdfunding is diverse. The categories of projects on domestic crowdfunding websites include design, technology, music, film and television, food, comics, publishing, games, photography and so on.

3. Rely on the strength of the masses: supporters are usually ordinary grassroots people, not companies, enterprises or venture capitalists.

4. Pay attention to creativity: the promoters should first show their creativity (design drawings, finished products, planning, etc.). ) can pass the platform audit, not only a concept or an idea, but also operability.

Seven. rule

1. A fundraising project is successful only if it reaches or exceeds the target amount within the time preset by the sponsor.

2. If the target amount is reached or exceeded within the set number of days, the project is successful and the sponsor can obtain funds; After the fundraising project is completed, the sponsor will get the reward promised by the sponsor in advance, which can be in kind or service. If the project fails to raise funds, all the funds obtained will be returned to the supporters.

3. Crowdfunding is not a donation, and the support of all supporters should be rewarded accordingly.

Crowdfunding was originally a means for struggling artists to raise funds for their creations, but now it has evolved into a channel for start-ups and individuals to win funds for their own projects. Crowdfunding websites enable any creative person to raise funds from almost complete strangers, eliminating many obstacles for traditional investors and institutions to raise funds.

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