The Pros and Cons of Crowdfunding


As Millennials age, they are becoming more financially stable and investing in their futures. A recent study indicated that Millennials prefer to keep their investments in line with their social, political and environmental values. Specifically, they want to make a positive impact with their investments. This affinity towards making an impact will have lasting effects on the business world.


Crowd Funding and Impact Investing  

Last year, Title III of The Jobs Act went into effect. Under this act, beginning May of 2016, companies can now source up to $1M in a calendar year through crowdfunding. Crowdfunding funds projects by raising small amounts of capital from a large number of people, typically via the internet. The concept behind crowdfunding is similar to many fundraising campaigns, in that it involves convincing enough people to contribute to reach your target amount. There are now over 600 crowdfunding platforms worldwide, and that figure is likely to grow.


Crowdfunding Models

When deciding on crowdsourcing as an option, it’s important to consider the various models of crowdsourcing that are available. Some options offer investors equity, interest or merchandise. Others are simply a donation or a mixed model of the above options. There are pros and cons to each model. Offering equity can result in answering to a large number of unsophisticated investors. You should also be aware of the processing fees charged by the crowdfunding platform itself.


The Drawbacks

Crowdfunding can negatively impact your reputation, especially if it fails. It may be difficult to excite more sophisticated investors when the failed campaign can be easily found online. Additionally, you do not gain the insights of expert investors and partners. In an interview with DMN News, Kevin Harrington said “The problem with crowdfunding is that people come in and don’t know how to do manufacturing,” Harrington says. “But we assist them in these processes. We know just about every player in the ecosystem here and abroad. We know how to get headphones made.”


After Crowdfunding

Remember, the point of crowdfunding is to obtain capital you might not otherwise be able to get. One of the most important things you can do is build your website and set up a marketing campaign for your product. You should also consider including a DRTV campaign in to your media plan. DRTV campaigns are easy to prove in terms of ROI, and are a great way to effectively launch your product.


Final Thoughts

If you are considering crowdfunding, be sure to carefully consider the marketing campaigns and experts you consult in conjunction with your efforts.

If you are interested in increasing your business presence, contact us at for more information on a DRTV campaign with Kevin Harrington.