Pros And Cons Of Crowdfunding: How Blockchain Is Here To Help

Crowdfunding is one of the most important tools that the modern day entrepreneur has in their disposal. Think about it, without going through all the red-tape and hoopla of traditional investment, you can simply reach out to your target audience to get your funding directly from them. However, as idealistic and straightforward as it sounds, it is not without its flaws. So, in this article, we are going to talk about the pros and cons of traditional crowdfunding. In the end, we are going to look at how Pledgecamp is going to mitigate some of these cons by leveraging decentralization and smart contracts.

If you’re considering in raising capital, Crowdfunding is one of the methods to help finance your business. Let’s look at the advantages and disadvantages of Crowdfunding

Pros Of Crowdfunding

• One of the most important pros of crowdfunding is that the creator retains full control over their product. Usually, in traditional funding, investors often dictate the flow of the project. Most crowdfunding platforms don’t give backers equity.
• Crowdfunding is relatively low-risk. You don’t need to do much before you start your crowdfunding campaign.
• Using a crowdfunding platform can help you gain exposure to your product and your brand.
• Many of these crowdfunding platforms have their own communities. Launching a crowdfunding campaign can help you tap into a community which may have some of your potential backers.
• Speaking of communities, the whole crowdfunding process can be very enjoyable. A successful campaign can get their community galvanized and create an extremely positive environment.
• Instead of getting a huge amount of money from one person, crowdfunding will allow you to leverage several small donations to raise a larger total amount.
• Successful crowdfunded projects are often romanticized as underdog stories. Which is why launching a crowdfunding campaign can gain a lot of traction on social media.
• Crowdfunding allows for “negative cash cycle,” meaning creators can receive money before they can render their services. This helps them to reduce risk and it requires less capital to operate.
• Crowdfunding is also a relatively transparent process. The backers and creators can openly talk to each other to be up-to-date with the project.
• Crowdfunding can also save you a lot of time. If your project doesn’t get any backers then you will know for sure that your idea is not going to work and you need to nip the project in the bud.
• Because of the low amount of paperwork and homework required beforehand, crowdfunding can give you a comfortable head start and allow you to launch your idea quickly.
• The creator can always reach out to the backers for feedback regarding their project, which can be very valuable.

Cons Of Crowdfunding

• In a typical investment, you are pitching your idea to investors who may have some prior knowledge about your space. However, in a crowdfunding campaign, you are pitching to the general public, which makes your message unfocused.
• Marketing your project in a way that it remains interesting among the sea of other projects available can be a little tricky.
• As mentioned above, the crowdfunding market is completely saturated. As a creator, you will need to work extra hard to get your project and campaign to stand out.
• In traditional funding, you have venture capitalists and angel investors investing in your product. They can introduce you to their connections, who can contribute to your project in different ways. You don’t have that luxury with traditional crowdfunding.
• Backers have no guarantee if their funds are going to be used properly. This is why most campaigns (64.15% of Kickstarter campaigns as per Statista) don’t even get funded. There is no proper accountability when it comes to traditional crowdfunding platforms, which scares off the backers. Ultimately, this affects the creators who actually have a good idea but can’t get the funds required.

Pledgecamp to mitigate the cons

Pledgecamp is a next-generation crowdfunding platform that incorporates blockchain technology for security and accountability. The whole idea is to leverage the blockchain technology and smart contracts to alleviate most of the cons of traditional crowdfunding.

Accountability through Backer Insurance

Pledgecamp will be using smart contracts which will lock a part of the funds in an escrow called “Backer Insurance.” These funds will be released to the creators only if they meet specific goals and milestones. This will make sure that backers can trust the creators to deliver on their promises.

Market Network for finding the perfect vendors

PledgeCamp has a decentralized and transparent marketplace called “Market Network.” As mentioned above, creators often have to handle everything on their own in a crowdfunded project. However, the Market Network will allow creators to hire professional or “vendors” to work on their project.

Having your backers market for you via the Gig Economy

A crowdfunded project needs to be heavily marketed so that it doesn’t get lost among the sea of other projects. Instead of hiring marketing agencies, creators on Pledgecamp can economically incentivize their backers to do the marketing for them. By harnessing the power of the crowd, whether it’s raising funds, or getting more participants involved for all sorts of various tasks that require the need for social engagement

Pledgecamp utilizes a gig economy wherein the creators can hire temporary workers from the platform’s “Smart Crown” to perform certain bounties and get paid in PLG (Pledge Coin) tokens.

Conclusion

A number of decentralized solutions exist today, such as Weifund, Lighthouse, Fundition, Blockhive, Crowdcoinage, Sigil and many more, that look to help businesses fund raise with the help of Blockchain technology. All of these are looking to disrupt the crowdfunding space by giving you all the benefits of traditional crowdfunding whilst taking away all of the major negative points in the process. Pledgecamp is leading the frontier when it comes to development, as this project looks to introduce an Ecosystem that is designed to capture the value created by real innovative ideas. Now is the best time to support the decentralization of Crowdfunding, if you’re interested in becoming a Moderator of Pledgecamp’s anticipated Crowdfunding platform, feel free to check out ‘’3 Reasons to become a Moderator Today’’