As an entrepreneur, there is no need to restrict your start-up funding options to only VCs and Angels. If you’re looking for an alternative approach to raising capital, then we recommend looking into crowdfunding platforms or venture builders. Below, we give you a quick snapshot of how both funding options work and what they have to offer, to help guide your decision.
Crowdfunding is a way in which entrepreneurs can raise capital via small contributions made from large ‘crowds’ composed of many individuals i.e., individual investors, friends, family and the general public.
The traditional approach to raising capital involves seeking large sums of capital from a few wealthy investors (angel investors) or venture capital firms. This is generally a time-consuming process with the main issue being entrepreneurs are unable to share their pitch to a large investor audience; instead they have to go one-by-one and run the risk of missing out on funding if they don’t meet the right investor at the right time.
Crowdfunding platforms instead allow entrepreneurs to leverage the internet to reach a relatively wider audience of potential investors (and customers) – streamlining their fundraising efforts by removing the need for the entrepreneur to spend time and money on finding and pitching the right investor. This also minimises the risk on the part of the investors by allowing them to invest smaller sums of money.
Crowdfunding platforms such as Seedrs and Kickstarter typically allow individuals to invest as little as £5 into a small start-up or project that has caught their interest. There are a few key things the investor should know as they go about their investment journey:
Venture builders, also called “company builders” offer long-term support for start-ups looking to grow. Through a comprehensive and hands-on process, Venture Builders focus on nurturing the ideas and skillset of entrepreneurs to help build out their ideas.
Venture builders are characterised by the 5 core activities they engage in:
Venture capital firms differ from venture builders in their operational involvement. VCs stick to investing capital into promising teams and ideas that match their investment strategy and area of focus, while Venture Builders invest significant effort into the growth of an idea and are involved with the day-to-day management of the company.
Venture builders do not take applications or run for a limited period of time, unlike incubators and accelerators. The business ideas which venture builders focus on are those that have been cultivated from their own network of resources and their relationships with the teams assigned last over the long-term until the start-up exits.
The primary advantage of venture builders is in their long-term approach to supporting founders. Venture builders apply their domain expertise and use their extensive network and resources to invest in a team and help build their idea; offering long-term security and support which is not often associated with accelerators who are focused with quick scaling. This is especially an advantage in today’s climate of economic uncertainty which is likely to see entrepreneurs focus less so on this ‘quick scaling’ approach and more towards achieving long-term growth.
If you’d like to find out more about the different types of crowdfunding, and the specifics of what these notable crowdfunding platforms and venture builders have to offer, then check out our piece [Mapping out Startup Funding Landscape] here.