Crowdfunding Problems

For most people, the idea of crowdfunding unfortunately does not align with the reality of it. Crowdfunding is the practice of funding a project or venture by raising small amounts of money from a large number of people, typically via the Internet. However, many crowdfunding users have experienced a disconnect between the promise of crowdfunding campaigns and reality. In other words, the problems of transparency, communication, and accountability in crowdfunding nowadays have limited the amount of individual investors to participate in these platforms. On the other hand, the promise of social media platforms and the worldwide web create false expectations for entrepreneurs when launching a crowdfunding campaign. Although some ideas go viral and become sensations overnight, a fundraising campaign is very different than just a video featuring a cat playing the piano.

Trust is one of the biggest problems when it comes to crowdfunding. From the entrepreneurs perspective, when you have a startups with no prior track record, it is important to be as transparent as possible about who is involved in the business, product development, market, industry, the project and company itself. You must generate enough credibility to attract project backers and investors to meet your fundraising goals.

It is important to build a solid communications strategy with your audience beforehand, during and after the crowdfunding campaign. As an entrepreneur, you must prove yourself and get people interested in your idea before launching. Once the initial crowd has been identified, it is vital to the success of your campaign to provide critical information about launch dates and campaign traction. As the campaign develops, a recurring communication stream with backers will provide transparency and customer engagement, which will later be essential throughout the growth of your business. Personalized outreach can help the existing backers feel engaged in the project, and therefore may result in generating interest in a larger circle of people.

For successful crowdfunding campaigns, it is important for the entrepreneurs to deliver the committed reward to their investors. Whether it is the sticker for the $5 dollar backer or equity shares, it is important to deliver what is committed. When expectations are not met, investors doubt the credibility of the company and therefore the entrepreneur’s brand, image and accountability.

Social media and the internet have made it possible for people to connect across the world. Crowdfunding takes advantage of this medium in hope to become the next viral sensation. Posts, likes, shares, hashtags, and targeted reach are social media tools from which crowdfunding campaigns benefit. Although social media is a great way to target an audience and reach, it is also important to take into consideration other forms media when fundraising. Endorsements from brands in magazines and newspapers provide access to the targeted niche needed to succeed.

Most importantly, remember that crowdfunding is one of many forms to fundraise at an early stage. Crowdfunding avoids entrepreneurs going through undesirable issues that can be found in other fundraising strategies.That does not mean that the entrepreneurs should not be transparent or accountable for delivering the product or service agreed upon.

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