Crowdfunding is becoming more popular than ever that it can now be a victim of its own success. As it provides startups the funding access they need, not all of these campaigns are able to live up to their commitments after the funding run is through. There are some companies that struggle to provide what they promised their investors after getting the money.
There are a lot of factors to consider when this type of challenges happens. There are some that could have probably miscalculated their finances and did not get enough to start the business. There are some projects where key personnel leave after their social funding run leaving critical areas of the business hanging.
Whatever the reason is, there are projects that are not able to follow through which place speed bumps on the industry. There are people asking if all these developments are just part of a hype that would later on slowly fade into the dark. These reports and more causes investors and industry backers to hold off on their funding and assess the situation.
How crowdfunding pays off
If you are an investor and you are looking for ways to avoid companies folding up after their crowdfunding run, here are a few things you might want to consider.
- Know your comfort level with investment risk. There is a risk in everything we do basically because we cannot predict what will happen in the future. Regardless of the size of the investment, there will always be risk involved. What you need to figure out at the beginning is your level of comfort when it comes to making investments. Try starting with an amount that you can afford to lose and go from there. Increase the amount as you get to your comfort level.
- Conduct due diligence on crowdfunding campaigns. You cannot simply rely on what the campaign tells you or what other people say about the company. You need to put in time as well in researching and trying to figure out if the company is who they say they are. They can make all the claims in the world about a product but at the end of the day, research will let you know if any of their claims are true. Once you know then you will be able to make informed decisions on your crowdfunding investments.
- Read up about the industry. There are a lot of developments within the industry as more and more people get involved with it. There are regulations being set by government entities to help safeguard the industry. There is also technology being introduced by other companies that can directly benefit the industry. Some key players put together educational campaigns as well to better equip not only project initiators but investors as well in using the platform.
- Diversify your investment. You might get excited with one project and decide to invest all your money into the campaign. This is a big gamble and could go either way. The best thing to do is diversify your investments by looking at different campaigns to support. You can also look at other investments ideas that can complement your crowdfunding portfolio.
This article is written by the Crowdfunders Editorial Team. In Asia, Crowdfunders.Asia is a leading portal on providing news related to crowdfunding, start-up, property and business. It is operated by CoAssets.com. CoAssets is South East Asia’s first listed and largest real estate crowdfunding platform. If you have any Crowdfunding news or stories to share, please email [email protected]