22. Crowd funding takes the next step towards mass usage – Af Tine Thygesen
In the recent years we’ve seen an exiting explosion on alternative early stage financing. One of the most promising, crowd funding, takes a big step towards becoming an accepted and normal method this week as the angellist introduces it on its popular platform.
Many markets, including Denmark, are notoriously under served with seed funding, leaving startups that require external capital to grow starved for cash (or in worst case dead) in a crucial early stage of their lives. In recent years we’ve seen several promising solutions that could be the alternative to seed funding from traditional venture capitalists; such as micro VCs, super angel networks and most notably, crowd funding platforms where people with a little bit of money can pool together to invest in a startups. They do this instead of investing their savings in shares or bonds because they hope for a bigger return, and because they find the journey exciting.
So far the most well known platform has been Seedr in the UK, with many (too) small local alternatives, but this week the famous Angellist introduced crowd funding on their platform. Angellist is a silicon valley site where entrepreneurs post info about their startups to a community of vetted investors who can the easily follow their progresss and invest if interesting. It’s been hugely successful.
On angellist individuals can now invest as little at $1000, in a minimum round of $150,000 in total. The advantages are many: its a formalized and easier way to have friends and family invest, there are many more possible investors, these investors often require less influence for their money and finally, it’s a good alternative if you struggle to raise the traditional way. It should be used for $50,000 to $200,000 and early learnings show that it’s important that the investors pool together as one unit, so they have one voice/ vote/ point of contact. Otherwise you may not be able to raise further rounds elsewhere as you cap table will be too complicated.
Crowd funding so far has had a varied response, many venture capitalists opposing it calling it messy and unprofessional. This is perhaps not surprising as this is a competing product to their own early stage funding, which is both expensive and elusive. But with a respected name like Angellist and its community of well respected investors behind it, this is perhaps the big step towards making crowd funding a respected, well known funding method. So it could be a good week for entrepreneurs.