Generally, crowdfunding has opened up opportunities for budding entrepreneurs and startups beyond anyone’s expectation. It has made everything easier for investors and all of a sudden, initial investments and capital are not a problem anymore. Currently, you can start operating as long as you have an idea of what you plan to do and a perfectly-thought-out pitch.
According to Shojin Property Partners, the process of crowdfunding helps when it
comes to putting an idea into action especially when it comes to property. It
involves making investors believe in a concept and encourage them to put a
portion of their financial resources into your project.
This concept has proved to be an effective way
of making business ideas fly. Some of the instances of crowdfunding success
include projects like Oculus Rift that raised about $2.4 million but was later
purchased for billions of dollars by a giant social network – Facebook. Tile,
an app that helps in locating missing objects, raised about $2.6 million
through crowdfunding.
Crowdfunding
gone wrong
This new funding technique isn’t a thing for
everyone. There will be instances of people who would simply take advantage of
the amazing promises of investment crowdfunding and swindle people interested
in investing.
You must have heard something about iBackPack
and Indegogo Kickstarter campaign. After raising about $750,000 via promises of
creating a TSA-friendly bag with outstanding features, Doug Monahan, the
founder, suddenly then went off the grid. They had promised great features such
as GPS abilities that can help locate the bag in case it is misplaced, Wi-Fi
router that could turn it into a reliable mobile hotspot, and outstanding
battery capabilities that could help the user charge different devices.
Investors involved in this project had an
inkling that something was not right when one commenter disclosed that he was
contacted by a Federal Trade Commission’s representative through email.
This email, according to The Verge, came from
the commission’s Bureau of Consumer Protection and the message intended to
establish whether or not fraud was committed.
The email also indicated that the commission
was trying to prevent any further unfortunate incidents of fraud from
happening.
Triton Artificial Gills is another
crowdfunding project that got funded successfully but badly ripped off the
backers. The project had promised the gadget users that they would be able to
breathe underwater for about 45 minutes.
The project raised approximately $850,000
within a few days before experts refuted different claims associated with the
gadgets. Eventually, the company pulled the plug on the Triton Artificial Gills
project and refunded the backers.
If you intend to invest, it is important that you are aware that sometimes crowdfunding investments could go wrong. It is important that you do due diligence in choosing a crowdfunding investment to avoid losing money.
Avoid being scammed in crowdfunding
There are effective ways of making sure that
you don’t get ripped off if you intend to support any crowdfunding investment
project. Sometimes, projects might not get completed for a simple reason that
the individual who started it offshoots the overall budget by miles.
Deadlines might not be met just because some
ideas require more time to take the right shape. So, if you are planning to cash in
on any investment, keep the following tips in mind.
1.
Understand the complexity
If an investment project sounds too good to be
true, there is a higher probability that it is. According to Digital Trends, it
is recommended first to understand the complexity of the project you wish to
support before giving out your money.
More complicated investment projects have a
higher risk of failing. While there is a higher chance of getting better ROI
for complex projects, understand that the probability of that project being
incomplete is high as well.
2. Do
your homework
One of the benefits of living in the digital
era is that it is now easier than ever to get information about anything and
anyone. If you intend to invest your money in a certain project, it is prudent
that you perform extensive research especially on the different people you will
be dealing with. You will definitely find incredible information about the team
you want to support.
3.
Analyze the crowdfunding platform
One of the reliable gauges for crowdfunding
projects is the specific platform where the campaign was launched. Most
reliable crowdfunding platforms have very strict screening processes before
they allow a certain campaign to run.
This should be your first line of defence.
This is because if such sites have published the project, there is a big chance
it is legit.
The Bottom Line
Generally, crowdfunding campaigns are
excellent opportunities for people to become part of something big and
revolutionary. You shouldn’t let the fear of the unknown prevent you from
taking part in something with the potential of becoming the next generation
discovery. Just do your research, gather information, and you should end up
investing your cash in the right project.
