Brief Outline on Crowdfunding

Crowdfunding is a growing alternative financing method that is gaining traction in the health sector. This article provides a crowdfunded health project typology as well as a review of the main economic benefits and risks of crowdfunding in the health market. We extend the fundamental principles and established theories of crowdfunding to a health market context using evidence from a literature review and expert interviews. Crowdfunded health projects are classified into four types based on the purpose of the venture and the method of funding. 

These are projects that cover medical expenses, raise funds for health initiatives, support health research, or finance commercial health innovation. Many of the discussed economic benefits and risks of crowdfunding health campaigns are also shared by crowdfunding projects in other industries. 

The negative externality that inefficient priority setting may have on achieving broader public health goals appears to be where crowdfunding health care appears to depart from theory. As a result, the crowdfunding health care market must be both economically stable and designed to optimally and equitably improve public health.

What are the Benefits?

• There is no formal banking system with crowdfunding, so no time-consuming procedures are required.
• It boosts innovation and entrepreneurship productivity.
• It aids in the advancement and advancement of small and medium-sized businesses.
• It contributes to the improvement of the ease of doing business policy.
• It is being investigated as a potential funding mechanism for creative work such as blogging and journalism, music, independent film, funding startup companies, and so on.
• It enables creators to access low-cost capital.
• Crowdfunding results in increased visibility, a larger customer base, and an easier time finding employees.
• Allow people to donate or invest in opportunities related to food and agriculture. One such global platform is AgFunder.
• It avoids caste or gender prejudice in the community network, increasing inclusiveness.
• It saves money. The platforms lower search and transaction costs, allowing for greater market participation.
• Individual investors now have access to previously underserved markets.
• Crowdfunding increases the value of companies because investors add value to them.

What are the Concerns?

• It is risky for new small-scale investors and entrepreneurs, and as a result, they frequently fail in their first ventures.
• A reputation is harmed when goals and targets are not met or interest is not generated, resulting in a public failure.
• Intellectual Property (IP) protection can be an issue because creators who use crowdfunding must release their product to the public during the early stages of funding, exposing them to the risk of copying by competitors.
• There is a risk that if the same network of supporters is contacted multiple times, that network will eventually cease to provide necessary support, rendering all efforts futile.
• There is concern about public misuse because there is no regulatory framework.
• Because there is no formal banking system, the chances of fraud and money laundering are high.
• There is a creditworthiness and enforceability issue.
• There is a lack of expertise because the novice ratio is high here.
• Because the startup sector in India is immature, the chances of failure are very high.

Advantages and Disadvantages of Crowdfunding

The most obvious benefit of crowdfunding for a new business or individual is the ability to reach a larger and more diverse group of investors/supporters. With the prevalence of social media, crowdfunding platforms are an excellent way for businesses and individuals to both grow their audience and obtain the necessary funding. 

Furthermore, many crowdfunding projects are reward-based; for their investment, investors may be able to participate in the launch of a new product or receive a gift. For example, the creator of a new bacon fat soap may send a free bar to each of its investors. Video games are a popular crowdfunding investment for gamers, who are frequently rewarded with advance copies of the game. 

Equity-based crowdfunding is gaining popularity because it allows startups to raise funds without ceding control to venture capital investors. In some cases, it also provides investors with the opportunity to gain equity in the venture. The Securities and Exchange Commission (SEC) regulates equity-based crowdfunding in the United States. 

The potential disadvantages of crowdfunding include the potential damage to your or your company’s reputation caused by “resorting” to crowdfunding, the fees associated with the crowdfunding site, and, at least on some platforms, if you do not meet your funding goal, any funds pledged will be returned to your investors and you will receive nothing.

Crowdfunding Pros

• Crowdfunding focuses on communication.
• One of the most significant benefits of hosting your fundraise on a funding portal is that you can consolidate all of your investor discussions into a single location.
• Prior to funding portals, you had to constantly update a large number of potential investors via emails, meetings, and phone calls, which was a tedious exercise in cat herding.
• Centralising your communications entails more than just email; it also entails constantly updating your fundraising profile so that any new information is immediately available to prospects.
• Consider it proactive marketing, which is an important component of fundraising.

Crowdfunding Cons

• Crowdfunding does not help you “find investors.”
• There’s a myth that if you post your idea on a crowdfunding site, money will fall from the sky. It’s all a myth.
• Successful fundraisers are almost always the result of the Founder utilising their personal networks, reaching out to prospects proactively, and creating buzz around the raise. 
• In fact, there is a direct relationship between the number of outside links to a crowdfund and its success.

Conclusion

Crowdfunded health projects are classified into four types based on the purpose of the venture and the method of funding. We extend the fundamental principles and established theories of crowdfunding to a health market context using evidence from a literature review and expert interviews. As a result, the crowdfunding health care market must be both economically stable and designed to optimally and equitably improve public health. The most obvious benefit of crowdfunding for a new business or individual is the ability to reach a larger and more diverse group of investors/supporters. With the prevalence of social media, crowdfunding platforms are an excellent way for businesses and individuals to both grow their audience and obtain the necessary funding.