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Is crowdfunding a valid method for a startup opposed to angel investing?

X

Angel investing has been a viable source of funding for startups for decades. With the evolution of technology I'm considering using Kickstarter. When using Kickstarter you can expect to see lower investment dollars at higher volumes, as opposed to angel investors who invest higher amounts of capital.

17 Replies

Lawrence I Lerner
2
0
Lawrence I Lerner Entrepreneur • Advisor
Digitalization and Transformation Coach
It's probably not an either or situation. Each has different strengths. There is a company I am currently with that is already well funded. The Kickstarter campaign is being used to generate user buzz.

The reach and audience of a kickstarter campaign is different. It can serve as an entry point or pre-angel funding.
John Seiffer
0
0
John Seiffer Advisor
Business Advisor to growing companies
I think you're thinking of Indiegogo as crowdfunding equity.http://www.crowdfundinsider.com/2015/03/65063-indiegogo-is-poised-to-move-into-equity-crowdfunding/

The typical crowdfunding campaign (kickstarter, Indiegogo, or many others) raises money by getting grants or selling product. It has a side benefit of showing the market response to the product (assuming the campaign is well run) so those are not really investment dollars, they are transactions.

Rules are still being finalized about how you can market equities through such a platform, especially to non-accredited investors. There will be limits on how much you can raise, this way and you'll need to consider if larger investors (angels and VC) will be hesitant to invest in future rounds if you do go that route in the early stage. Assuming you need future rounds.
John Anderson
2
1
John Anderson Entrepreneur
Senior Mobile Developer at Propelics
ask Pebble
Michael Jay Moon
3
0
Co-Founder at StartupReady.Net
For the right product or even service, crowdfunding is a brilliant and effective way of accomplishing the following:
  • De-risk the business model through validation with classic early adopters
  • Create a pre-sales pipeline with prepaid customers!
  • Demonstrate concrete traction to potential investors as well as traditional source of borrowed funds
  • Use rewards or premiums to validate a larger, upsell solution set
  • Interact with early adopters to tweak the fit and finish of a product
We have seen the emergence of "enlightened angels" who will only invest in crowd funded products as a precondition: "we will help scale revenues based on the evidence and traction of a crowdfunding campaign."

Perhaps the greatest value of crowdfunding a product entails the creation of a "socially proofed" product that upon its entry into commercial channels comes with a fan base, press coverage, all manner of social proofs, and scalable buzz!

Products or services with a social mission tend to do better. However we have begun seeing more traditional business-to-business products getting crowd funded by innovative product managers!


Hopefully this came through: a high-level overview of crowdfunding campaigns

Steve Everhard
0
0
Steve Everhard Advisor
All Things Startup
Kickstarter is a clean transaction as far as future funding is concerned. These are early adopters acquiring access to a product or service - or a reward - at the earliest opportunity. A pre-order in many ways. As the funding is predicated only on the reward there is no equity issue or long term exposure.

Other crowdfunding solutions, like CrowdCube, offer equity investment through a proxy holding by the platform. In essence investors are part of a fund invested in that equity and do not have direct voting rights (assuming the share class grants them) or other preferential access. The advantage for the company is that they have one shareholder on the register.

How successful these routes are will depend on your offer. Although crowdfunding can be an important marketing strategy to gain awareness it can fall flat if your raising is undersubscribed or so unpopular that it is suspended by the platform. This happens. You have to approach it like an auction, do your PR in advance of the offer and get your social media campaign underway to drive early demand. You also need to keep feeding the offer with new information during the campaign to prevent it stalling. You also need to be able to offer attractive rewards.
Steve Everhard
0
0
Steve Everhard Advisor
All Things Startup
@Kwame Leslie Dougan please turn off your email relay. You are flooding FD with your out of office messages!
Christina Otto
0
0
Christina Otto Entrepreneur
Green lighting
I used Indegogo an was very unsuccessful last year but my social media was not very strong
Dave Brown
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Dave Brown Advisor
Venture and Private Equity Investor
Please turn off your auto response message as you have now sent numerous emails with the same unhelpful message David G. Brown [removed to protect privacy] [removed to protect privacy]
Melissa Skehan
0
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Melissa Skehan Advisor
Passionate, Mission Driven, Strategy, Growth & Impact Leader - Founder, CEO, President, Executive Management

Here are a couple of great articles about crowdfunding (specifically for women enterpreneurs).

I think this is a very exciting platform for companies (women and men led organizations) and believe there are some great advantages for women - especially if any of the characteristics mentioned are applicable to the founder and/or the company.

http://www.crowdfundinsider.com/2015/07/71191-crowdfunding-is-changing-the-female-entrepreneurial-landscape/

blog post for mission-driven entrepreneurs who would like to raise money from investors: http://www.jennykassan.com/index.php/2015/05/24/how-to-raise-money-from-investors-without-losing-your-mind/

and another article from Jenny Kassan (an expert in the field of equity crowdfunding efforts and big supporter of women entrepreneurs):

http://www.locavesting.com/raising-capital/if-startup-funding-is-so-plentiful-why-are-many-women-entrepreneurs-still-struggling/



Denis duNann
0
0
Denis duNann Advisor
Co Founder at Hempworks Ventures
It is difficult to raise capital on the web (crowdfunding from people that do not know you) if you don't have, at least, 25% of your 'raise' secured from Angels that know you. Your Angels can minimize their risk using equity crowdfunding platforms that refund the investment if 100% of the 'raise' is not secured.
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