What is crowdfunding?
Crowdfunding is a system for saving money to build a business. It utilizes social media platforms like Facebook and Twitter to obtain a greater list of likely investors. Crowdfunding is basically when a great magnitude people commit a small amount of money to help build a business, and through loads of them investing and helping, significant amounts of money will be saved.
Crowdfunding helps companies raise capital through the assistance of other like-minded individuals. It also provides investors the opportunity to become shareholders within the company. In the past, crowdfunding was only available to recognized investors. Accredited investors would normally include banks, insurance companies, and sophisticated investors. Although there are restrictions, non-accredited investors can now take part in crowdfunding for equity and real estate transactions.
What are the advantages of crowdfunding?
One of the good thing about crowdfunding is that one does not need a great amount of money to chip in, in some instances, the minimum is $1,000 dollars to commit in a business. Also, if the company goes public, basically meaning they bring out a new stock through first a public offering. there could be a massive opportunity if the company goes global.
What are the disadvantages of crowdfunding?
Of course, the biggest risks to crowdfunding is that an investor is putting their money in a company that is basically an unknown, the company may not have a lot of financial history, there is a risk that an investor could lose all of their investment. Also, if your business idea is not protected with a patent or copyright, someone outside or even within the business may steal and distribute your product through their own business.
Crowdfunding provides an easy way to invest small amounts and potentially get great returns. However, it is vital to keep in mind that investing in real estate is inherently risky, and crowdfunding is still a new concept. One should proceed with that thought in mind. Real estate crowdfunding may not be the kind of investment to dump a large amount of your life’s savings into. Fundamentally, a lot of thinking would have to be done to invest wisely during crowdfunding.