Venture Capital vs Crowdfunding
Often venture capital and crowdfunding are mentioned as one in the same. While they do both typically raise funds for new businesses or business ideas, there are some key differences. With venture capital pieces of ownership of an emerging company are created and sold to a few investors through limited partnerships. Selling parts of your company also gives investors more input and control over the company and how it is run. According to Katherine Hague’s Funded, less 25% of all businesses receive venture capital from angel investors or venture capital firms. Crowdfunding is an alternative means to raise capital for a startup.
Rewarding the Funders in Your Crowd
Crowdfunding, as mentioned in a previous blog, is raising money from a large group of individual investors. One method is considered a rewards-based practice. People contribute money to a business in exchange for a reward. This reward can be the product itself as is the case with Kickstarter and Indiegogo. But there is no expectation of a return on investment.
A Few Things to Consider
With crowdfunding, entrepreneurs retain full control over their business and operations. In addition, the money raised does not have to be returned to investors. Crowdfunding platforms connect entrepreneurs to consumers and willing investors without too many barriers or middlemen. A successful crowdfunding campaign will clearly communicate to its target audience and convince them contribute money. But, as explained by Steven Dresner’s Crowdfunding: A Guide to Raising Capital on the Internet, protecting intellectual property, IP, is particularly important on crowdfunding platforms given the need to publicize your creation to the public prior to being able to launch your idea.
To find out more information about crowdfunding your small business, the Dallas Public Library has various resources for check out. See what’s available by typing “crowdfunding” into the online catalog, then select ‘nonfiction’. There are also multiple courses on crowdfunding and 98 videos about the subject on Lynda.com that are all available with your active Dallas Public Library card for free!