Crowd funding is probably one of the easiest ways to get funding for a project. I find crowd funding to work very well for charitable causes, but that shouldn’t deter others from trying it. Would it work in the app business? Initially, I thought it would work considering funding is one of the challenges developers face every day. However on closer inspection, I realized it isn’t so. There are a lot of things that could go wrong with it.
Taking an idea to the world before one has patented it or created the product is exposing it to theft. There are companies out there who can invest in a lot of projects but the reason they don’t necessarily fund projects is because they want to have 100% control over the product or service. Taking an app idea to a platform where they can easily snatch it is not really worth it – it’s a double loss.
Not for every business
Crowd funding works in certain areas but doesn’t seem to in other areas. If an app developer was to get funding through crowd funding, it probably won’t be the same as a donation to a charitable cause, it would mean that investors earn a certain percentage of the app sales. The problem with this is that half of the people that will throw money your way won’t even care or understand the hardships that go into developing and taking your app to the market – they just care for sales. Why then don’t continue on the search for venture capital because the people that will invest in your app will actually care, teach you a few lessons and provide some guidance along the way.
Breaking the law
Crowd funding is not a legally registered financial way to collect money or perhaps solicit money from investors. Therefore an app developer would need to tread carefully and ensure that as he/she collects funds from people, they do not end up breaking any financial laws already in existence. This would then mean hiring a financial lawyer to help with the legalities around crowd funding legitimately and allow the developer to come out of the process unscathed. Reputation means and costs a lot. This will cost a lot of money, again which the developer perhaps doesn’t have at that given moment.
The time that a developer can spend working on their app will go to things such as finding a financial lawyer as mentioned above. But that’s not all – to get the idea of the ground so that it goes viral and bring in the money, the developer will have to work with a large network of people who can help spread the idea. That’s a huge time investment one that could be worth nothing in the end if little money is raised.
Should the app not make a lot of money through sales, can the developer crowd fund again for upgrades and ongoing maintenance? No! This therefore is a terrible way for app developers to raise money and in my humble opinion would only work for a few developers and not the whole industry.