Crowdfunding is no doubt the best way to raise funds. There are other forms of fundraising but, crowdfunding is the newest kid on the block.

Crowdfunding can be done in many ways, either online or offline. Each one has got its own advantages and disadvantages. The modern day crowdfunding is done online.
Online crowdfunding is done mostly via websites specially dedicated to crowdfunding. These crowdfunding websites make the process of crowdfunding more easier and more cheaper. As the offline way of crowdfunding involves many other things which are to be kept in mind, like the cost of printing banners, volunteers, and space for advertising.etc

These crowdfunding sites are here to save you from all these hassles. There are many ways to raise funds, crowdfunding is one such technique. But each type of fundraising has got its own advantages and drawbacks.

Advantages of crowdfunding:

  • Alternative finance
  1. Consumer feedback
  2. Market Validation
  3. Exposure

Drawbacks of crowdfunding:

  • Requires planning
  1. High platform fee
  2. Failed campaign


1) Funding:
This is the #1 advantage of crowdfunding. Individuals can donate funds easily via these crowdfunding sites as most of them offer different payment options. It is solely depending on each person's opinion rather than a collective group donating funds. Each person has the freedom to donate as much as he wants to, which is easy on his pocket. In the case of reward-based crowdfunding, you need to give a reward for each person who donates. The good news is that you can set different rewards for different kinds of funds they donate, like a cut off mark which differentiates between the person who donates less and the person who donates more. If the gifts are attractive, it'll encourage people, to contribute a much bigger amount towards the cause.

2) Consumer feedback:
Consumers are the people who will buy your end product. If you're a startup business who is selling an innovative product, you will receive a lot of feedback from the consumers/donors. This is vital as it'll allow you to make more improvements to your product. Generally, companies make prototypes of their product and advertise so that these last minute changes can be made suiting the end consumer. A product is bound to have certain flaws, the feedback allows to correct the flaws.

***3) Market validation:***This is one of the primary reasons why a startup must choose crowdfunding over other forms of fundraising. Family and friends are willing to donate and generally give good feedback. It is the validation from the market and the total strangers that count. "Are people willing to donate?", "Is this product beneficial to the people".etc all these questions are answered while crowdfunding.

4) Exposure:
In crowdfunding, you're not only raising funds for your cause, but you are also spreading the word about your company to many people. If it is a social cause, you're making people aware of the importance of the cause. Educating the girl child and saving our tigers are two such examples of social causes. If you're a brand, your product gets the much-needed exposure and publicity without spending an extra penny for it.

Coming to the disadvantages,

1) Requires planning:
Any type of fundraiser requires proper planning which should result in skillful execution. Proper planning is the base for any successful fundraiser campaign. If you're a brand who's selling a product, you must keep in mind of the cost of manufacturing, the cost of shipping.etc Many brands have failed in shipping their products and have fallen victim to improper planning. The time taken to plan depends on the type of the campaign and a number of funds you want to raise. Personal causes usually require less time, but if it's a big brand, they may require as much as two to three months and a good crowdfunding strategy.

2) High Platform Fees:
Raising funds via crowdfunding platforms may be cheaper, but it is definitely not free. Each crowdfunding platform charges a certain amount of platform fee which ranges anything from 2% till 10%. 10% of your total funds raised can make a lot of difference. It certainly affected few companies who underestimated the cost. Choose a good crowdfunding platform which charges you less. Milaap is one such site which charges less than every other crowdfunding site.

3) Failed campaign:
There's nothing more embarrassing than a failed campaign. It may damage the reputation of the business. It leads to loss of trust among the people who pledged their money.

In spite of these shortcomings, crowdfunding still has an edge over other methods of fundraising. This is why crowdfunding has boomed rapidly in the past years. It is estimated that crowdfunding will increase four-fold in the years to come. So, choose a crowdfunding site like Milaap and give wings to your cause.