Could you explain to me the advantages and disadvantages of crowd funding to a business as a long term source of finance

Crowd Funding is when a business uses an online platform in order to raise money from several small investments in exchange for small rewards like a T-shirt or a share in the business. Some advantages of crowdfunding could be; several small investments: this is important for a business as they have a higher chance of gaining the required amount of funding they need as millions of people could invest if they are interested in their product or desire the reward for helping their fundless risk of losing control: as the majority of crowd funding projects give out small rewards, management get to keep the shares in their business and not risk being taken over by a venture capitalist in order to gain the required finance raises awareness: in a way, crowd funding acts as free publicity as anyone who invests in the business or sees it on a crowdfunding website will be eager to try the business' products when the crowd fund is successful, increasing the business' customer base. However an important disadvantage of crowdfunding is the competitiveness of it, their are millions of businesses trying this source of finance now, and on top of this unless the full funding amount is achieved the business wont receive the funding they raised, potentially making this method a waste of valuable resources.

JR
Answered by Joshua R. Business Studies tutor

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