Crowdfunding has been around for a while. In recent years, however, crowdfunding has really come to the forefront of business and finance. It is now being used in many industries to raise money from people who want to invest in a product or idea they believe in. One study found that out of the top ten largest deals made by venture capital firms last year, six were investments made through crowdfunding platforms!
Crowdfunding works. Over the past few years, it has adapted from product bonus sites like Kickstarter to full-blown equity sites like StartEngine, Republic, and Wefunder. It is now being used to fund everything from movies, games, and music albums to innovative technology products seeking investment.
The rewards for entrepreneurs are huge when a crowdfunding campaign succeeds. Not only does it help get the product or idea off of the ground (by providing seed money), but there are also benefits to forgoing the traditional VC route.
Crowdfunding can provide funding without giving up board seats. Traditional VCs will often want to take over part of the decision-making process within your startup. This can be a huge issue for first-time entrepreneurs who are used to running their business the way they see fit. With crowdfunding, you can maintain control of your company while still raising money from people who want to see it succeed.
Crowdfunding also allows startups to bypass the dreaded Series A crunch. This is where most startups hit a wall when it comes to raising money. They have raised enough money to get their product off the ground, but they need more cash to keep going. This is where VCs come in and offer a Series A investment round. However, this can be difficult for startups because most VCs want to see traction (meaning that the product has been proven) before investment. Using crowdfunding platforms, startups can raise their Series A without the grind and due diligence that is required by most VCs.
Taking the crowdfunding route can also double as a marketing benefit. When your startup is featured on a crowdfunding platform, it gets broad exposure to potential customers and investors. This can lead to media coverage and even more investment down the line. People who invest in your company will become brand ambassadors by default.
The bottom line is that crowdfunding has a ton of benefits for entrepreneurs. It’s a great way to raise money without giving up control of your company or succumbing to the dreaded Series A crunch. Not to mention, it can also help with marketing and exposure. If you have a product or idea that you believe in, then crowdfunding is the way to go.
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