Equity crowdfunding, or raising funds from both unaccredited and accredited investors, can be a great alternative to venture capital for startups. The strategy has become significantly more popular in recent years now that venture capital is harder to come by, and changes in regulations allow companies to raise more money at one time.
Key Takeaway
Equity crowdfunding offers a whole host of benefits to startups, including access to repeat investors, customers, and talent.
The Misconception
Despite the growing prominence of crowdfunding and its benefits to startups, many traditional investors continue to speak negatively about the strategy. They believe that equity crowdfunding is only for startups that can’t raise venture money and that the capital raised lacks the value that traditional investors bring, such as their network, mentorship, and experience.
Debunking the Myth
Chris Lustrino, the founder and CEO of crowdfunding data platform KingsCrowd, challenges the negative perception. He emphasizes that crowdfunding is not just for raising capital. According to Lustrino, KingsCrowd has been able to attract repeat investors, customers, and talent through their crowdfunding campaigns. He argues that the value-add from venture capital is minimal in reality, suggesting that traditional investors may be biased in their opinions.
