Crowdfunding is a new idea that is catching up fast as an alternate fundraising option for different types of creative businesses across the globe. Here we compare it with Venture capital option to fund your start-up.Venture capital is a tried and tested fundraising option; however, crowdfunding is replacing it in the ascent of progression.
Depending on your type of business and objectives each one of these methods has their own merits and demerits.Crowdfunding is now one of the most sought after forms of start-up and SME finance. It is showing excellent growth as more and more start-ups opt for crowdfunding. It is essentially a market where investors connect with entrepreneurs and their start-ups. Following are a list of benefits of using crowdfunding for entrepreneurs looking for fundraising of their start-ups:
It gives exposure to multiple investors.
Crowdfunding platform provides a broader brand exposure.
The Concept gets tested for acceptance or otherwise through the crowdfunding platform.
It is quicker than the traditional means of financing.
As per a new survey by ‘The Crowdfunding IQ’ nearly sixty percent of the members were interested in making investments via crowdfunding platforms. These investors are seeking start-ups and SME showing immense potential for growth as well as transparency for investment.
Venture capitalists are known to be careful investors. Many entrepreneurs are choosing venture capital over crowdfunding because they found it a better fit for their business goals and funding amount required for growth. Here are some reasons that you may decide to choose the same route:
VCs, bring valuable knowledge and a wealth of network with them.
There is no limit for funds to be acquired through this route.
What is the best fit for your organization?
VC funding is often preferred by tech start-ups, which has a chance of growing exponentially within a short span of time. Crowdfunding is more apt for consumer goods based start-ups who prefer testing out their product market fit during the fundraising.New start-ups prefer crowdfunding to get their project started. Since it has often the potential to raise funds quickly.