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Equity Crowdfunding: Risks and Rewards

Equity Crowdfunding

In earlier times, people collected money for their projects and business activities by borrowing it from their close ones, contacting a venture capital firm, or by applying for a bank loan, but nowadays Equity Crowdfunding has gained popularity over these traditional methods.

Risks of Equity Crowdfunding
  • Failure of the business/idea

The business idea that you have invested in, might fail, because of any reason. The main person behind the idea might lose interest after gaining the amount of money he or she wanted. The idea in general might fade because of some innovation by another company. The idea or business might not get mentored by the right people. The most promising business venture might fail, so you never know what you’re getting yourself into.

  • Chance of fraud

Some random person, sitting in any corner of the world might just create a fake business and compel you to invest. These online forums try their level best to present ideas that are real and viable, but in order to reach the maximum number of people, social media platforms are used, that let a huge number of people apply. In short, there is always a chance of fraud.

  • Returns might take forever to come

What seemed like a perfect place to invest in, might just take forever to create returns. Wealth creation is the aim of any business but due to unlimited number of factors, the venture might just end up wasting the capital it already had, leading to zero or minimal returns.

  • Platform Security

Before investing in any such platform, keep in mind that in the world of today, hackers are active everywhere. Leading companies, retailers and even banks that provide credit cards, have been affected by them even though they are reliable places to keep your money. Keep an eye on platforms that are the safest.

Rewards for Equity Crowdfunding
  • The Higher the Risk, The Higher The Return’

You must have read it a hundred times, heard it from multiple people, the fact stays. Higher risk always leads to higher return. You might get a return so big that you might end up buying your dream car or your dream house. Well who doesn’t want that to happen?

  • Satisfaction for the investor

Some people invest in businesses whose mission is something close to their hearts. It gives a deep satisfaction to the investor if he gets a chance to invest in something that he or she might have wanted to create at some point in their lives.

  • Accredited/Un-Accredited Investors

Equity Crowdfunding gives a platform where there is a level playing field for accredited (individuals with high net worth or defined number of assets) and unaccredited investors.

The Bottom Line

Now that you have an idea about the Risks and Rewards of equity Crowdfunding, you can weigh them and decide what opportunities you have when it comes to investing your money or saving it just to stay on a safe side.

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─ April 18, 2016