VALUATION OF CROWDFUNDING: BENEFITS AND DRAWBACKS

Abstract

The aim of this paper is to broaden the body of knowledge about crowdfunding. Crowdfunding is an innovative and relatively new concept that connects investors to entrepreneurs. It is a method of fundraising, based on the ability to pool money from individuals in order to turn promising ideas into actual businesses. Crowdfunding is presently growing very fast and this growth will probably be magnified after the anticipated changes in law are made. Due to the novelty of the approach, a number of problems and fears arises, what might lead to an underestimation of the approach and possibly missed opportunities. Taking a look at crowdfunding through the prism of the SWOT analysis allows obtaining a comprehensive picture of the subject. The strengths of crowdfunding are: a chance to test marketability, the accessibility of capital, benefits for communities, rights to make company’s decisions stay in the hands of entrepreneurs. Weaknesses include administrative and accounting challenges, the possibility of ideas being stolen, weaker investor protection and potential for fraud, also, crowdfunding is exceptionally internet based, so investors might lack advice. Identified opportunities include the existence of niche, information society and positive effects crowdfunding is expected to have on economy, also, such threats as the risky nature of small business and unsuitable legal restrictions arise. Gaining deeper understanding about crowdfunding could be useful for entrepreneurs choosing a way to raise capital and investors seeking for different investment opportunities.

DOI: http://dx.doi.org/10.5755/j01.em.18.1.3713