Crowd Funding or VC for the Startup Investments?
Crowdfunding is essentially a platform where entrepreneurs and founders list their products and concepts in a campaign for 30 days. Attractive people can buy or support them with a pre-order or donation.
Usually, companies in this stage would look into VC funding, bank loans, debt equity, or family and friends to assist. Crowdfunding can open your company to potential clients and still offer family and friends an opportunity to help.
There are pluses and minuses in taking the crowdfunding route when getting funding for your startup. The common questions on the matter include: Can crowdfunding and venture capital coexist? Is one better than the other?
Just five years ago, crowdfunding was a relatively small market of early adopters funding small projects on anything from new music to intelligent microwaves. Nowadays, campaign platforms like Kickstarter and GoFundMe provide a simple and effective way to raise awareness and capital for your company. Pebble raised $43.4 million from crowdfunding platform Kickstarter, a record for most capital raised — ever. The company was two years ahead of the competition and, most of all, had a millennial cult following.
Venture Capital has been a proven business model for decades, but it’s often more than just capital. VCs are professional mentors and networkers. Having a notable and experienced VC can transform your startup with more than just money — have a look a the original Tesla team.
Tesla formed in 2003 with Martin Eberhard and Marc Tarpenning. They financed the company until Elon Musk came in with $7.5 million.
Traditional crowdfunding platforms promote campaigns about your product, and when you back a campaign, you usually pre-order the product. Equity crowdfunding can do this too. However, when you support an equity crowdfunding campaign, you guessed it, you buy a pre-order and shares in the company at the same time.
Equity crowdfunding offers a reasonably fast and efficient way to get your startup’s name out, prompts you to get your branding and vision together, and offers a safe and sophisticated platform for you to raise capital and grow pre-orders.
Venture capitalists are now starting to pay attention to equity crowdfunding and with a host of trailblazers enabling both interested parties, family and friends, and VCs to invest. We’ll see equity crowdfunding pass traditional VC investment in total investments shortly.