What Crowdfunding Needs to do to Stay Successful

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Crowdfunding has been a rewards-based tool that has driven a number of businesses to success. With funding rates of over 40% on some platforms, it has been a platform to test out new ideas, allowing entrepreneurs to find funding when it hasn’t been available in traditional ways. Equity crowdfunding has become the new place of growth, but with barely over $200 million in the first 12 months of its existence, there could be natural caps in place that will make crowdfunding stagnant in the years to come if it is not addressed.

What does crowdfunding need to do in order to stay successful? It needs to get away from the traditional investment forum. Here’s the problem: in over 160 years of non-professional investing, the average person relies on the advice of others. In crowdfunding, that type of investment just isn’t going to work, but campaigns are still run like that’s what is going on. For the modern non-professional investor looking for equity, crowdfunding needs to turn a corner.

What Can Be Done To Improve Equity Investments?

The first thing that startups need to look at is how they are presenting their information. In the past, they have relied on angel investors and other professionals to endorse their idea, support it perhaps, and that “tells” the average non-professional that there’s a good idea going on. The problem here is that isn’t always possible any more. Investors have a lot of access to tools today that they didn’t have in the past. They can see when a company is trying to pull the wool over their eyes.

Crowdfunding doesn’t need to have a national presence for a company in order for success to be achieved. It is very possible for a company to go to their community to get the funding that is required. That’s how investing has been traditionally accomplished and for good reason: local dollars have more influence. People are investing in a community’s future when a crowdfunding campaign stays local. It benefits everyone.

That’s Not to Say Leadership Isn’t Required

Crowdfunding still needs to have leaders be able to show the average investor what a good deal looks like and what a bad deal looks like. This will allow them to be able to make their own decisions regarding their community investments so that they aren’t just throwing their money down an ever-sucking vacuum pit of nothingness. This platform needs people who will step up, show the importance of investing, and do so from local perspectives.

If that doesn’t happen, equity crowdfunding is likely going to attempt to replicate the successes of reward-based crowdfunding and that’s bad news if it happens. These are two very different investment vessels that have two very different outcomes in mind. Rewards are for a short-term investment profile. Equity is more about long-term success. By making sure that the right message is sent out and legitimate investment opportunities exist, then the future of crowdfunding can be very bright indeed.

If not, then equity crowdfunding could be in some very serious trouble.