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Pitfalls of raising capital through crowdfunding

Sasha Karen
07 February 2017 1 minute readShare
A businessman looking down as he stands atop a tall building

Crowdfunding may seem like a lucrative way to raise funds with hardly any effort involved, but many aspiring entrepreneurs’ crowdfunding efforts end in disaster. Luckily, there’s a better way to secure funds for new projects.

Trying to convince investors to raise funds for new business ventures has always been challenging. However, with the advent of crowdfunding and websites like Kickstarter, budding entrepreneurs and business owners can now present their ideas to the public and ask for funding.

However, this not always a cut and dried proposition.

Robert Tiller, at Tiller Design, creates prototypes and manufactures products for other businesses. He has seen exactly how difficult it is for new and existing businesses to raise funds through crowdfunding.

“[With] Kickstarter campaigns, [business owners] just get the money and go, ‘What the hell? What do we do now?’ And quite often they’ll fall over in two or three years when no one’s looking,” Robert says.

A businessman looking down as he stands atop a tall building“And that’s the sad back-end of Kickstarter in some respects.”

Kickstarter itself backs up this view. According to its own figures, only 35 per cent of crowdfunding campaigns on its platform are actually funded, which means most attempts to raise funds are met with silence or, at best, only a lukewarm response.

Robert says it is here that an industrial designer can demonstrate their value by bringing a concept to reality, dramatically reducing the risk involved in raising funds.

“A full-blown industrial designer is a specialist in the field of bringing products and devices to the world,” he says.

Instead of leaping in without any additional knowledge, an industrial designer provides external help and advice, which can be vital for a start-up business. It also helps business owners with “putting a business together, helping go out and actually raise your finance, putting a business structure in place, putting the corporate governance in the right place [and] understanding who should own your intellectual property”.

“They’re all things that most start-ups don’t even think about,” Robert says.

Hear more insights from Robert about prototyping and taking innovative new ideas to market on the My Business Podcast now!

Pitfalls of raising capital through crowdfunding
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Sasha Karen

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