Advantages And Disadvantages Of Crowdfunding For Startups – Findings And Analysis

Findings 1: Providing Access to Capital

The study has been conducted taking into account secondary research and 2 pertinent interviews. Start-ups often aim at attracting equity crowd-funding, which has started since 2011 in the India. Crowdfunding can act as a catalyst for creating new funding for bringing equity investment into mainstream business (Gerber & Hui, 2013). Analysis of scope of crowdfunding has revealed several advantages and disadvantages of crowdfunding as being the impacts from the same. The findings have been arrived at from 2 interviews conducted one from an Indian startup Riot Solutions and another a UK startup called Technocon. The name of the first interviewee was Adra and name of second interviewee is Puneet Singh The first company in India offers e-Monitor and the second company provides services to Siemens Company products. The following are some of the findings of the study;

Findings 1: Providing Access to Capital: Crowdfunding has gained prominence amongst Indian startups. There are a number of startups that have been established in the India in recent years. Some of the platforms includes SEEDRS, fantoo, escape the city, estatesdirect.com, eMoneyUnion, Rushmore, HAB and so on. From the interview-1 it was understood that HAX crowdfunding was used which helped the company to collect US$140,000. The Indian startup could not opt for other crowdfunding startup as it was not available. Another company had made use of Kickstarter and was successful in raising $150,000.    

The crowdfunding projects that have succeeded in recent years can be understood from the figure below as well. The capital that had been raised successfully from the projects has already been depicted. 

Findings 2: It provides hedging against risk: Crowdfunding allows collecting money from smaller number investors and not from a single investor at a time. Resorting to a large number of investors allows startups to defer redemption at one go and hedge against risks.

Table 1: Risk Profiling of Crowdfunding

Type of Risk	Risk Category
Avert	Manage	Mitigate	Risk Profile/ Impact
1. Repayment risk		Manage		Medium
2. Timeline risk			Mitigate over long period	Medium
3. Credit risk			Mitigate	High
4. Overall Risk				Manageable

Findings 3: Crowdfunding serves as a marketing tool: As crowdfunding is collected from a large number of people, it also helps generate consumers of products or services. Crowdfunding serves as a marketing tool for a greater number of investors/consumers. The interviews revealed one from tech company and other service company, had to hire marketing agents to promote their company but the crowdfunding in itself acted as a marketing platform.   

Findings 4: It provides proof of concept: Gathering fund from a large number of investors allows proving the concept of business in itself. Investors supporting the business acts as a proof of the success of the concept. The first interviewees concept was not knew in the Western markets, however it was a new idea in Asian markets. The concept of e-monitor being relatively new and the product being pricy. In another interview service for Siemens products was relatively an old idea.

Findings 2: Hedging Against Risk

Findings 5: Crowdsourcing allows brainstorming of ideas: Investing in crowdfunding has a brainstorming impact, as investors need to be convinced through the certain idea. Both the companies conducted nerve rattling marketing promotions for their companies.

Findings 6: Crowdfunding allows prospective loyal customers for the business: Investors once convinced for the business, can become prospective clients for it as well. Convinced investors can also act as investors for the business, which is reflected through several business ideas. Bothe the interviewees was able to attract client towards their businesses.

Findings 7: Provides easy of attracting funds compared to traditional methods: Traditional and debt related businesses funding ideas often require complicated procedures to get accepted. Regional breakdown of some crowdfunding initiatives depicts crowdfunding is very young and the exchange is small. Looking for all the offers in 2011 and the first half of 2014 to get an overview in the form of annual fluctuations. The increase in purchasers’ purchases has an impact on the distribution of regional companies. Crowdfunding platforms focus on London and the south. The crowd fleet is more prominent, it was launched to the southwest (which is the source of funding for such a region), which has recently expanded to London. London has many other important places, such as EIS and EIS seeds, and the Cambridge Annual General Meeting. London is an undisputed leader in scouting in the UK both in business and in investment. London companies received 102 bids, while in Southeastern 25 and the other. London companies also received £ 24.3 million, while the southwest was £ 7.6 million. From 2013, the gap between London and other regions has increased significantly. Formerly a regional unit and in 2011, the southwest was the largest bid although all investments were still in London. Crowdfunding London’s strength is the most prosperous position in the UK’s investment and capital corporation. In the first half of 2014, the 2014 London Finance Cooperation Agreement noted a lower percentage of total trade in the region (12%) compared with other regions such as the West Midlands (17%) at noon. Western (24%) and Northern Ireland (13%). The Indian startup revealed in her interview that she had no other option. Similar opinion was voiced by the UK start-up.

Findings 8: It allows the enhancement of public relations: A business is able to build large relationships with consumers and investors hence public relations. A good PR at the beginning of a business often proves to be successful for the long-term period of the business. Sectoral department reviews all events between 2011 and 2014 to cope with the volatility caused by annual information fluctuations. Technology and Intellectual Property Rights were the most successful sector and the transaction volume was $ 50 million, or £ 13.7 million. In 2011-2014 the industry is the highest, 45: 7.4 and 42, and trade and industry 42 and 8.8 million kilos. Nama three sectors comprise 60 percent of operations and 63 percent of total investment. Technology / IP Seka Professional Industrial Services and is the first-second generation of trade and investment in the UK at the same time, if success fits. Industrial subcontractors are unexpected, but Silla Talla was significantly less in the season on the major investment market. Public finances account for 17% of the sector and its business 5% for technology / IP and 8% for commercial professional services. It is Bebemes, all other sectors, higher in the first half of 2014 than in 2013. The industry was the first three years of the industry in the first half of 2014, but it could be a sign of diversity: since 2011, business and professional services are an important part of the business. The next level of the best interpreters was rest and entertainment, 21 deals with a total of 5.3 million pounds. Half Event 21 was 2.6 million. Both the companies was technological companies but one was in India, another one was in UK. 

Findings 3: Crowdfunding Serves as a Marketing Tool

Findings 9: Provides an opportunity for preselling: Crowdfunding business allows the opportunity for preselling. Through selling of concept to investors and convincing them, they are able to presell their ideas.

Findings 10: It is accompanied by little cost or is free: Crowdfunding investors provide funds to the business expecting no fixed return. Unlike in regular debts, startups might not be able to afford the the fixed cost for setting up the business. Crowdfunding approved 18 events and 2.5 million. Small mobile phones, average free presentation compared to other areas with great relief Total investment for all retail businesses. Good prospects for growth potential in the big market to support the entire consumer market, and as previously mentioned, Return to date has focused on the development. In total, there was a total of 14 branches in the private sector. An incredible result compared to a relatively small industry that handles the total amount. The stock supports the population by 18% of industries. No longer because the whole company, forests, and fisheries are small and it seems to benefit the demographic structure. Obligated during the first half of 2014. 3 8 events and 1 million. Investments in industry 9 million. The pound sterling 2011-2014 was merged. You will see that the article did not traditionally attract a lot of investment money. Private equity funds were developed in the United States in the middle of 2000 and early 2011 in the United Kingdom when the hearing began. Since then many other platforms have emerged, some of which have tried different models and rows (see below). Seedrus became the first agile group to be elected a Financial Behavior Authority (FCA); Since then, CFA has played an active role in monitoring the capital and the legal framework to support such development. For example, the required council after the VIA, the new regulator of FCA, which includes measures to improve the protection of investors. to the first startup in the interview, the crowdfunding campaign came at a cost of 20% liability and to the other startup, it was at 15% liability.   

Findings 11: Affects the future prospects of startup businesses: A business opting for such sources of finance is able to expand in a random manner. But in the future, there might be challenges, which the business might face in raising further finances.   

Findings 12: Crowdfunding might require effort and can emerge to have no result in the end: Businesses might not succeed in the end to raise crowdsourcing finances. This was not supported by either of the interview.  

Findings 4: Provides Proof of Concept

The following discussion has been developed in connection with the interviews that was taken, which revealed various facts regarding crowdfunding. Crowdfunding has several positive and negative effects on the start-up phases. Crowdfunding makes more consumers and is interested in seed financing (Beaulieu, Sarker & Sarker, 2015). Entrepreneurship has allowed exploring different types of investment types and designs, many of which are expected but very demanding. Several offerings were selected directly in the ownership structure, with individual investors responsible for their own start-ups. Others select the structure of their claimants in which the underlying company treats the actions of investors on their behalf.  One of the public characteristics is that a company calculates the exchange rate valuation, usually, it is set, which leads to higher debt in relation to the business and what investors can expect (Vismara, 2016). Start-ups uses a different strategy, as brainstorming is automatically valued during the pricing process and depend on the interest of the investor. Some less accumulated platforms rely more on other areas and their usual activities. Crowdcube has created a corporate fund managed by Inversión Corazón Valiente, in which the public can invest in a limited liability company. Similarly, Seedrs offers the opportunity to invest in a hurry in the fund and programs, benefiting experienced investors. Crowdcube began to pay off debts based on their debt and Setrers began offering convertibles (Kuppuswamy & Bayus, 2018). Some were created for a specific social or community orientation, such as the Multitude Mission. In general, contracts funded by crowdfunding on the crowdfunding platform do not have other mutual investments, but this is not always the case. HAX offers opportunity for various Asian start-ups and Riot Solutions was one of them to qualify.  

Crowdfunding platforms such as Seedri and Crowdcube provides such opportunities. Often consumers might be interested in any product, regardless of the fundraising potential campaign, the investment has created. Investors often come from being consumers of real products (Tomczak & Brem, 2013). It works well when the consumer market overlaps the audience of investors. Crowdfunding is effective but takes time and effort to convince investors. Increasing investments require a lot of work and are not easy to attain over time. Economic opportunity does not take note of aspects of business growth. The company can directly find investors such as Eliminating LinkedIn, saving the cost of credit usually 5-7% of the applied by the exchange platform fund-raising or the forecasting corridor agent (Ahlers, Cumming, Günther & Schweizer, 2015). Crowdfunding is more effective than angelic investors. However, successful campaigns need intelligent materials video and writing, so that original speculative efforts are still important. The crowd is really an exciting crowd. It is unusual for the campaign finance group to succeed in case one has already paid 30% of the turnover before it was published on stage. It is referred to as the “inertial money”. This is necessary to affect other investors, especially in the case of start-ups (Ley & Weaven, 2011).

Findings 5: Crowdsourcing Allows Brainstorming of Ideas

Crowdfunding requires exact qualifications as the biggest criticism of the group’s funding lately depends on the company’s estimates. As in case of Riot Solutions, all fore-runners of the Company were primarily technical persons and did not have much knowledge of marketing. But in the second company, the promoters possessed some knowledge regarding marketing. It seems that many good developers have changed. This is almost the time decrease in the passive state incentives the risk of investing in seed and ultimately increasing the estimates. Investors are sensitive to this development in cases of start-ups and follow the paradoxical reaction (Bocken, 2015). The financial investors and fund managers have difficulties in controlling the investor group to manage all documents at the beginning of the investment. Hence, they generally do not prefer the start-ups in their portfolio. Investors need to be informed regularly. Some investors may be curious about others and they need more management. But in general, it is much easier to communicate than managing individual relationships (Carvajal, García-Avilés & González, 2012). Crowdfunding provides ease of access to capital. An entrepreneur may think that only the capitalization of venture and investment banks can accredit for non-specific accreditation. But this might not emerge truly for start-ups. Crowdfunding is a good choice for financing companies and can be achieved without capital or debt. The rented platform offers an opportunity for entrepreneurs to get community funds to give them certain products or gifts (Mollick, 2013).

The risk associated with crowdfunding is generally hidden. Starting a business is a dangerous and difficult journey. In addition, there are predictable costs, problem marking and assurance, and others who are trying to help the longest part of the repertoire now. A risk evaluation campaign can close risk associated with crowdfunding and serve as a useful learning experience. Crowdfunding, today, offers entrepreneurs today to market certification and transfer their own goods before marketing and marketing (Hemer, 2011). Provision of marketing tools is rendered by crowdfunding in start-ups. Effective entertaining effective campaigns are a great way of placing on-market projects and outlook. Many of the social networking sites are many in order to provide a reference platform for your site and other social networking sites. In general, this brings thousands of organic visits to Enterprises from individual users and potential lenders. The use of users is an antivirus marketing center as they can share information about their links and shares (Moritz & Block, 2016). Proof of providing the idea is established in crowdfunding start-ups. The market is difficult at the beginning, but crowdfunding eases it. The first question that an angel investor or institutional investor is often a proof of concept and a great way to gain respect and trust is to prove that the company performs a successful crowdfunding campaign. It allows different brains to provide ideas on the start-up. One of the biggest challenges for small businesses and entrepreneurs is to fill all the gaps in business (Vismara, 2016). In addition to the financial campaign, the entrepreneur has the opportunity to attract public opinion, obtain opinions, comments and ideas. This opinion is important because it helps to understand some aspects of previously ignored activities. It can also inspire other ideas to come and contribute to the business from potential customers.

Findings 6: Crowdfunding Allows Prospective Loyal Customers for the Business

The crowdfunding campaign not only presents entrepreneurs’ activities and products but also gives them the opportunity to share their message and goals (Schwartz, 2012). Those who view it as a marketing effort and decide to participate in people who believe in a long-term successful company. Essentially, these people are the first recipients of the start-up business. The first users are very important to all companies because they help to pass the message without asking. These people care about the brand and message of the company and can be loyal to customers throughout their lives. Easier than traditional programs to obtain finance, as it is often difficult to obtain debt funding for start-ups (Belleflamme, Lambert & Schwienbacher, 2013). Applying for a loan or looking for another investment is one of the most tedious processes that all employers must undertake, especially at an early stage of their activity. Fortunately, the process of applying for crowdfunding is a place where traditional methods are compared. It provides a free public relation. The success of the campaign will attract potential investments from traditional channels and media attention. Success stories are interesting and publishers are always looking for them. Horror is unique and warm (Lehner, 2013). 

Social Funding in Southeast Europe is in the same category as in London is strong, but it is responsible for the role of the municipality in large investment markets (Courtney, Dutta & Li, 2017). It should be noted, however, that a relatively large share of the trade in the region is financed by a surplus of 28% in 2014 in the first half of 2014. The Group’s financial activities are the strongest in the Southwest, given the relatively favorable position of all the assets and probably due to the investment-oriented public presence. In London, this is the first area where the financial group started in 2011 and remains one of the most important financial areas in Group 3 for transactions and other investments. The impact of social financing in this area: In the first half of 2014, 39% of all South West support was granted, which is 4% of total investment. West Lahi ITA without the OLE capital market is another surprise. In the field of OLI 17 transactions with a combined Maara OLI 3.8 million pounds between 2011 and 2014 Between the first half of the year. Influence is, even more, a financial group. The investment group’s contribution in the first half year was 32%. In the first half of 2014 (excluding Northern Ireland: 14%) The total population deficit: never more than 8% investment in the regions. Similarly, the demographic structure accounts for 43% of total trade in the region (Valanciene & Jegeleviciute, 2013). In case there are several initiatives, there are opposite reasons, there are relatively strong investments in public places. Between 2011 and 2014 during the first half of the year, events in northwestern China, OLI 12 performs a total of 229 events. There were 3 events in the northeast of 158; Yorkshire and Humberside earn. Scotland had only 5 operations with 231 shares. Scotland is well-known through the network of active players, which may have a greater impact on Iceland’s initial investment than in other UK countries. Taman Vuoksi Scotland wants to strengthen the British tendency to increase its resources and reduce its Angels network contract. The first Interviewee provided rewards to the crowd funders whereas another startup provided equity.  

Findings 7: Provides Easy of Attracting Funds Compared to Traditional Methods

Understanding the risk of commercial law and protecting investors continues to grow. It is known that the market is developing and maturing (Bretschneider, Knaub & Wieck, 2014). The total has all the action and continues to increase investment in 2011, but only 1.6 billion crowns were put on seven occasions. In the first half of 2014, 101 measures were invested in 101 shares, according to Beauhurst. This represents 18% of all visible transactions and 2% of all visible investments. of the Group’s cash investment is still low compared to the various platforms, recently published shows nesta4 £ 193 received in 2013 a loan linked to § 19 platforms SEK 5.000.000 has been put into stock warehouses Beauhurstin according to figures. Nestas report is predictions that the Group invests in the collector platform in 2013, which is much more than the 28 million euros worth of Beauhurstin. The difference is due to the different Nest and Beauhurst – the first contains an analysis of collected data collection platforms, investors and businesses, and only based on the cost data of the Beauhurst investment reported. Both uses have different ways to manage market scalability. There is no useful answer from Beauhurst’s information in this report. Crowdfunding, people are still a relatively small part of the investment in the ecosystem, which shows a rapid growth.

The regional pattern of trade and investment shows that London is ahead, then southeast and southwest. In some areas of peat, and southwest, the West Midlands and Northern Ireland, the volume of bonds have a disproportionate impact on investments, which represent an important part of the trade and/or total investment. The location of the platform seems to be affecting the regional distribution of trade, mainly in London and in the south in general. More nutritious shopping platforms open for business customers across the country and see the first transactions can be made available to the regional distribution of markets (Giudici, Guerini & Rossi Lamastra, 2013). The first classified technology is  in line with the stock market in general. The interest in the life sciences is remarkable because of the shame and the specificity of the Syndicate Room AV platform using investor experience and angel investment frustration in the minds of the crowd of investors. Projects and products Consumers should dress that have proven to be popular, occupying the serious ideas. There is lack of crowdfunding startup platforms in India as compared to UK.

Findings 8: It allows the Enhancement of Public Relations

The offers of companies that work with the concept of crowdfunding for startups, which accumulate money platforms to buy, improving the success achieved affiliate / banking and financial services (Belleflamme, Lambert & Schwienbacher, 2014). It seems logical investors are already sold on the idea of ??crowdfunding, will be on board with the other models, the crowd. In Britain, there is a devastating effect of converting capital. Its solid growth from 2011 shows that in the coming years it will continue to convert the investment landscape in Great Britain. The industry has found established feet and their trends, there will be many other issues raised in relation to the capital market business failures and the risks faced by private investors. The most important production of nutrients was made (Kirby & Worner, 2014). A recent report by Wilson and Testoni point out that capital can be much more dangerous for the funding of business angels or venture capital, due to the lack of adequate preliminary review, which is smaller and new investments and the monitoring of the investment and knowledge of the offers. They appear from relatively inexperienced investors who do not have investment skills (Bruton, Khavul, Siegel & Wright, 2015). The range of these potential risks will be more familiar when considering the implementation of a large number of large-scale projects.  

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Findings 9: Provides an Opportunity for Preselling

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