The additional advantages for a company using the crowdfunding model for their business is that it establishes a huge customer base while seeking the funding as well it provides a unique channel for marketing the company and its products. There is a huge exposure of the business to bulk amounts of capital and in the process the company and its products and services get validated as well. This entire chunk of goodies regarding the idea is not without its own bunch of downsides. The genuineness of the ideas are questionable as the investors do not really test the concept (Colombo, Franzoni & Lamastra, 2015:75-100). Moreover it isolates the company from the real professional investors. The laws associated with crowdfunding as set by the U.S government are also quite stringent and the most critical of this being the cap on the investment by any single investor within a fixed period like a year or so.
Also the process is to be executed through a broker or dealer who is registered or alternatively through a portal for funding. Crowdfunding is till date adopted by only very less-known financial institutions that neither have a lending legacy nor any track record. The investor will have to check extensively on the business idea and the owner of it and the entrepreneur will have to in turn validate the source of funds.
Crowdfunding has grown phenomenally over the past five years allowing all kinds of people to raise money as capital for their ventures, be it of any kind. To support it the President Obama signed the Crowdfund Act in 2012 (Andreoni, 1990:464-484). Even though there have been no set rules and policies for this concept, there have surely been a paradigm shift in the nature of social funding. The forthcoming years is also set for a very exciting scene on this front and may also integrate a retail version of the model into the online shopping market. The abilities of crowdfunding have been examined by investors and the capability it has to convert capital finance into profit. The lack of the risk taking ability within the traditional setup has always challenged innovation in the field of business to which this is an answer.