Effective funding will result in opportunities but if it is done in haste it will surely result in growing pains. Since it is the time of the modern generation, everything from the products to all services should be high in quality and effectiveness. Even businesses need to be designed, run and funded in a better way to meet with the varied and growing need of the modern day market and its consumers.
In comes the next generation crowdfunding, an entirely new funding launch pad that is ushered since May 16. It will change the look of the business world that can expect more opportunity but there will be growing pains along with as well.
However, there is a significant and unprecedented level of excitement noticed in the industry insiders, despite the fact that the world of finance will take a long time and even halt at times to get accustomed to the painful process of such transformation.
About the concept
Ideally, traditional equity crowdfunding is a process in which an entrepreneur sells pieces of the business in exchange for cash. This was historically available only to the accredited investors or to those investors who have sufficient levels of wealth.
With the ushering of the next generation equity crowdfunding, there will be no bar in participation in equity crowdfunding. Everyone is now welcome as long as one has the cash as well as the interest to become a startup investor.
This means it will open up an entirely new pipeline of capital for the startups and an increased opportunity for the investors to earn more at the same time. This new concept will surely change the future and prospects of the equity crowdfunding industry.
Education is required
However, just as any new launch, proper education is necessary and arguably this primary requirement also seems to be the most important hurdle to cross. This is primarily because everyone involved must go through this learning curve because the new generation funding signifies the finish line of the old process and a new beginning of the crowdfunding industry.
- First of all the new system contains a lot of exceedingly charged information that is provided by a wide variety of highly opinionated stakeholders that you will need to sift through and understand.
- Secondly, from all the information you will need to sort out and avoid the misinformation which is another big challenge. Proper education will ensure that you understand this highly controversial equity crowdfunding landscape which is the main reason that lots of people hate it even though most love it.
- Thirdly, proper education will prevent all investors from being overly optimistic and the entrepreneurs from jumping in it early on. This is dangerous for both sides of the equation.
It is, therefore, required to follow the essential guidelines and know the new ‘wild west’ of funding and liberty lending. This will help you to make an informed decision whether you are an entrepreneur or an investor and get the results that you expect from crowdfunding.
Be ready for the bright future
For most entrepreneurs and investors who are interested to take part in crowdfunding, it will ideally be their first time raising money or making an investment.
- As for the first-time entrepreneurs, it means they will have to face the challenge of having a lot of investors having very high expectations.
- On the other hand, for first-time investors, it will be a challenge to be more realistic than optimistic about the performance of their investments in this changed scenario.
Since both, entrepreneurs and investors are starting a business it will be hard and unwise to expect a path without any roadblocks and unexpected hurdles coming up every now and then. It is required to get over their hurdles together which will undoubtedly lead to a few growing pains for both entrepreneurs and investors.
- Therefore, as an entrepreneur, you must be ready for writing your own rules and learning what will work best for your business. You will need to be a true pioneer by yourself to step out first and make the most out of these new rules. That means, as an individual entrepreneur you must be an early and easy adopter.
- You will also have to figure out the tactics and distinguish between the successful and unsuccessful one to employ when you want to raise capital from a crowd. You will need to know the high risks as well as the high reward involved in the world of investing when the fundamental finance law changes.
Another challenge that you should be ready to face as an entrepreneur is that you will hardly have an existing network of potential investors to enjoy the benefits following the crowdfunding portals. This will also create a marketing challenge as you will need to build networks of investors for crowdfunding portals.
You will need to do careful and thorough research on these equity crowdfunding platforms to launch your campaign on. You must know at this point all campaigns will not offer the same services and therefore choosing a proper platform is a very critical component for you for your equity crowdfunding investor’s journey. You will need to know the way your platform is set up and the ways in which you can manage post-funding. A lot of questions needs to be answered such as whether it will sit on a board, will it provide you with investment reports, and how will it provide the added value and lots more.
Therefore, you will not only need assistance to raise funding but will also require help in myriad areas including raising additional funds and business development.
On the other hand, as an investor you must be ready for:
- A terrific time
- An increased opportunity to make money and
- A chance to gain experience as crowdfunding becomes mainstream.
That said, there is a real possibility to be successful as an investor or as an entrepreneur provided you learn to adapt quickly with the changed funding and finance laws.