Crowdfunding and Venture Capitalism is a Dream Relationship

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With equity crowdfunding rules being developed slowly and surely, it’s no real surprise that entrepreneurs and small business owners are turning to this platform to find the capital they need. This also means that it’s not really surprising to see venture capitalists moving into this arena as well.

Venture capitalists need new ideas to have life. Some of the best ideas are coming from the independent atmosphere of the crowdfunding world. Fusing VC and crowdfunding, therefore, is the dream relationship that the future business world really needs.

What Is the Benefit For a VC To Use Crowdfunding?

It always boils down to the proof of a concept. Instead of needing to test ideas in specific customer segments, crowdfunding allows for a low-cost way to see if an idea is worth spending some time on. It saves time and money because it keeps venture capitalists away from the bad ideas they might have been tempted to chase in the past.

The crowdfunding platform also streamlines the evaluation process of a business plan for the venture capitalist. Instead of dealing with a dozen different requests in a dozen different formats, the VC can have precise information in a standard campaign format. This allows a new idea to be quickly reviewed and evaluated.

Crowdfunding Requires a Demonstration of Strength

In order to receive the funding that is desired, a crowdfunding must be able to show that there is strength behind the concept and the team that created the concept. These are the same strengths that VCs need to determine if an idea is a good one.

Venture capitalists can’t ignore the fact that there are literally tens of thousands of people using crowdfunding platforms every day to make an investment. This brings a level of instant validation that the industry has never really seen before.

Oculus Rift is proof that this works. They raised $2.4 million through their crowdfunding campaign. Andreeseen Howowitz led another fundraising round through venture capitalism. The result? $75 million.

Crowdfunding is the first step in a longer journey that should include venture capitalism. If your a small business with a new idea, don’t be afraid of the VC world. If you’re a VC, then look to crowdfunding for your next hot idea. By working together, everyone experiences better overall success.