Offering up some advice for those looking to use crowdfunding, CoAssets revealed four potential problems to using the funding method (and how they should be handled).
The Singapore-based real estate crowdfunding platform shared:
“Crowdfunding has forever changed the way people look at fundraising whether for themselves or for a business idea. What was once an industry that was partly monopolized by big commercial banks, venture capitalists and even hedge fund companies. Social funding started a paradigm shift and gave the power back to the people and the masses.
“They decided which projects receive a go or no go when it comes to funding and operations and their sheer number made these realisations possible in as short as minutes or even just days or weeks. Admittedly, the more traditional lenders employ more stringent approval methods because they handle and release bigger amounts of money. They do this to manage and mitigate risk as much as they can.
“That is not to say that crowdfunding is free from risk and potential problems that can creep up at different stages of a crowdfunding project. It can come at a time where project initiators are just starting to put the project together, when they have already launched the campaign or even at a point where they already raised the amount they need for the project.”
CoAssets went on to discuss the problematic situations that may happen duruing a social funding initiative.
- If one of your team runs away with the money:
“Money is a delicate subject matter and a sudden surge in it which can bring out a person’s personality and character. Love for money is the root of all evil and it can rear its ugly head even in crowdfunding. If you are running a crowdfunding project and one of your team members run with the money, you are left with promises and obligations to fulfil without the resources to accomplish them. Let your backers know what happened and to show how serious you are with the incident, seek the help of authorities for restitutions because this can fall under the Consumer Protection Act.”
- You do not reach your target:
“Your campaign might lose steam along the way and not reach its desired financial goal. This is disheartening and could really crush your dreams of starting that business and being able to help a lot of lives along the process. Instead of being morose and sulking in one corner, use the experience to better yourself and come back armed with all the learnings from a failed project and try again.”
- If the beta product doesn’t work:
“Having a prototype is an important part of the project because it shows potential investors and donors that your idea works. Do not prolong the problem and fix it as soon as possible. Look at all angles to try and see where the problem lies. If you really cannot make it work, pull the plug and work on it first before launching the project again. It is better to be upfront with your investors and tell them the situation than lie and proceed as if nothing is wrong. That is a gamble you better not take too early in the game.”
- Team members leave:
“It is possible that your team might walk away for a number of reasons and leave you and the project hanging in the air. Again, it is better to let your investors know about the situation but rather than just giving them a problem, offer some solutions which could include getting a new team on board to pick up where the old one left off.”