As we’ve seen, using crowdfunding sites such as Kickstarter can be a great way to cobble together some cash in a down economy.
They allow customers, friends, and strangers to invest in businesses in exchange for a small revenue share later on.
But The Wall Street Journal reveals they also have their drawbacks.
Most sites, like RocketHub, hold the money until a monetary goal is met. But if it isn’t, all funds are returned. Only about 45 percent of projects on RocketHub reach their targets, and the rate drops to 25 percent for small-business ventures.
And on a site like IndieGoGo, which releases funds regardless of whether the goal is met, only around 10 percent of projects hit their targets.
This has turned some entrepreneurs off. “I wouldn’t do it again,” says Aton Nocito, a soda maker who used IndieGoGo. “It was worth the try, and it was a good learning experience, but for me, I may end up going other routes next time.”
Photo by Kickstarter/RocketHub/IndieGoGo.