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On this week’s TruCrowd Bulletin, we’ll touch on how equity crowdfunding holds up against a traditional method of raising funding, venture capital.
Venture Capitalists (VCs) are investment firms or groups of investors who find startups to support financially. They provide investment in exchange for equity and can provide multiple rounds of investment as a company grows. Before, venture capital was just one of few options early-stage companies go to when they need funding before equity crowdfunding came along.
Like VCs, investors in equity crowdfunding provide funding in exchange for shares in the company. But unlike VCs, the “crowd” can become investors too, giving businesses more opportunities to raise capital and gather support.
Check out below to find out more about these opportunities and how the coronavirus pandemic changed the game for investors and businesses alike.
Enjoy reading and stay safe out there!
The coronavirus pandemic has brought about several changes in the world of investing: pushing venture capital to the sidelines and making way for crowdfunding to help businesses that are struggling to raise funds.
Tech over tradition: Venture capital’s business model that relies heavily on in-person conferences and meetings has taken a hit when the world suddenly shifted to being online and working remotely. Equity crowdfunding, on the other hand, has always been present and thrived online.
Adjusting to the situation: Struggling to keep themselves afloat, most businesses turned to crowdfunding to raise funds during the pandemic. Meanwhile, venture capitalists have taken a step back and became more cautious and conservative with their investments.
There several ways equity crowdfunding can be a better choice for your early-stage company than the traditional venture capital.
Choosing accessibility: Equity crowdfunding levels out the playing field for players that have lesser “connections”. By raising funding from a greater pool of people, entrepreneurs also aren’t limited by strict investor terms typically imposed by VC firms.
Choosing community: Aside from raising capital, equity crowdfunding introduces your company to a bigger audience. You are able to build partnerships and garner support from the public, something you can’t do with VCs that happen behind closed doors.