February 24, 2020

The Editor speaks: Crowdfunding

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Colin Wilson

We have published a number of articles on crowdfunding, some showing the potentials and successes and others the pitfalls and the scams. Even The World Bank has promoted Crowdfunding – see https://www.ieyenews.com/wordpress/world-bank-group-promotes-crowdfunding-for-caribbean-entrepreneurs/

Law360 have published a story today (11) “Crowdfunding democratizes justice for some” see https://www.law360.com/access-to-justice/articles/1135132/crowdfunding-democratizes-justice-for-some?nl_pk=3dff67ed-0e27-47ea-8f8b-9a83ecddf692&utm_source=newsletter&utm_medium=email&utm_campaign=access-to-justice

They summarise it saying: “The poor, the desperate and the popular have turned to crowdfunding for help paying for bail or legal bills. The former two categories tend to have far less success than the latter, experts say.”

The article starts:

“Deborah Nichols pled her case on the Internet.

“She asked strangers for $75,000 to bail out her son Sakai French, who is being held in adult jail in Las Vegas awaiting his murder trial. Arrested last year at the age of 16, he is accused of shooting and killing another teen during a fight at a high school.

“Nichols took to a website called Funded Justice, where she told Sakai’s story and posted photos of him: Sakai playing with a dog. Sakai at the beach. Sakai flashing a braces-lined smile in a jail visitation room.

‘“No matter what’s against him he still keeps his joy,” the mother of three wrote. “Son don’t let them take your beautiful smile away …”

“Nichols is among a flood of people turning to crowdfunding platforms to pay for criminal defense or when facing deep-pocketed adversaries in civil and family litigation. There, they ask strangers online to chip in with small donations to help them pay often devastatingly high bail or legal bills.

Nichols has not received a single dollar since the campaign went live two months ago.”

What exactly is Crowdfunding?

The best explanation I can find is from the website fundable.com:

“Crowdfunding is a method of raising capital through the collective effort of friends, family, customers, and individual investors. This approach taps into the collective efforts of a large pool of individuals—primarily online via social media and crowdfunding platforms—and leverages their networks for greater reach and exposure.

“Crowdfunding is essentially the opposite of the mainstream approach to business finance. Traditionally, if you want to raise capital to start a business or launch a new product, you would need to pack up your business plan, market research, and prototypes, and then shop your idea around to a limited pool or wealthy individuals or institutions. These funding sources included banks, angel investors, and venture capital firms, really limiting your options to a few key players. You can think of this fundraising approach as a funnel, with you and your pitch at the wide end and your audience of investors at the closed end. Fail to point that funnel at the right investor or firm at the right time, and that’s your time and money lost.

“Crowdfunding platforms, on the other hand, turns that funnel on-end. By giving you, the entrepreneur, a single platform to build, showcase, and share your pitch resources, this approach dramatically streamlines the traditional model. Traditionally, you’d spend months sifting through your personal network, vetting potential investors, and spending your own time and money to get in front of them. With crowdfunding, it’s much easier for you to get your opportunity in front of more interested parties and give them more ways to help grow your business, from investing thousands in exchange for equity to contributing $20 in exchange for a first-run product or other reward.”

However, you must beware as Fundable.com is a Crowdfunding platform.

On the premierline.co.uk website they have a simple table showing the Advantages and Disadvantages of Crowdfunding.

Having above I have already shown the advantages so here are some of the disadvantages according to premierline.

“Crowdfundable projects are visible, finite and understandable. If your project isn’t all three, it’s unlikely to succeed.” Anne Strachan, Crowdfund UK

If the target amount isn’t reached, potential investors get their money back and the business goes away empty handed

Failed projects risk damage to the reputation of the business and people who have pledged money to them

Such a public display of an idea risks others copying it

Getting the rewards or returns wrong can mean giving away too much of the business to investors

“A company that has a limited network, no digital or social media presence, or a very complicated product will find it harder to crowdfund.” Jude Cook, ShareIn

For the whole article go to: https://www.premierline.co.uk/knowledge-centre/what-are-the-advantages-and-disadvantages-of-crowdfunding.html

If any reader wants to comment on this and/or has real time experience of Crowdfunding I will be pleased to hear from you.

You can crowd my website with all your comments.

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