Advantages of Crowd Funding Your Startup

Published: 10/22/2012 8:40:44 AM

This is Part 1 of a series on the advantages and disadvantages of crowd funding your startup company.

There are several variants of crowd funding in existence now: donation crowd funding for nonprofit organizations, lending-based crowd funding where money is paid back over time, reward-based crowd funding where investor receives an item or service and equity-based crowd funding where investors purchase a portion of the stock of the company.

Regardless of the type of crowd funding involved, there are a number of advantages in this new type of funding search process:

- Access to a larger pool of potential investors.

- Online services streamline and automate the process of communicating about and receiving investment.

- You can obtain a potential initial customer base for your product or service, even before it is commercially available.

- Company owners may retain greater control over the direction of their company, i.e. no individual large investor asking for board seats.

- If initially successful, a fund-raising effort can increase in size dramatically due to the "social proof effect" of seeing others invest in the company.

- Greater visibility and publicity from a successful fundraise.

- Reduction of funding search efforts enabling company owners to focus on the business instead of fundraising.

- Limited time frame for fund-raising helps owners minimize distraction.

If you've chosen to crowd fund your company, there are a number of Do's and Don't associate with raising capital this way.

Stay tuned for the next post in this series.

Don Jones


Don Jones
CEO, VentureDeal

Blog Home

Free Trial

Want unlimited access to the complete database with thousands of technology companies, VCs and transactions for only $25 per month?

Start your Free 14 Day Trial now – no obligation or credit card required.

Free 14 day trial. No Obligation. Click to Register.

RSS Feeds

Add this page to your RSS aggregator page with a simple click of a button below.

Add to My Yahoo! Add to Netvibes