Kickstarter is the national brand name when it comes to modern crowdfunding right now. In some ways, it has become the best friend of every entrepreneur and venture capitalist because it means any project or idea is within reach. Just look at Oculus VR, which was able to raise $91 million in venture capitalism before being purchased by Facebook for $2 billion. Or there’s Coolest, which was able to raise $13 million. Pebble raised $10 million.
Even Reading Rainbow raised $6.5 million in total with over 100,000 backers.
Why is Kickstarter so successful today when it isn’t even rated as one of the best crowdfunding platforms that exist right now? It is because this platform is able to test the proof of a concept in a profitable way so that venture capitalists can instantly judge whether or not an idea is worth an investment. For that reason, Kickstarter will always be successful.
Why Do Venture Capitalists Look at Kickstarter First?
Although Kickstarter isn’t the highest rated crowdfunding platform, it isn’t niche related like so many other platforms are. You’ll find everyone from artists to filmmakers to tech products on Kickstarter and everything in-between as well. It’s a place where instead of using surveys and interviews to determine if a product or idea is viable, businesses can encourage ordinary people to invest with their wallets instead.
Take Coolest, for example. At its core, it is basically just a cooler. It does offer other items, however, like a blender, built-in Bluetooth, and other technology advancements so that it becomes more of an “awesome” party cooler than just something that Grandma and Grandpa take along during a road trip to visit the grandkids. It raised $13 million because more than 50,000 ordinary people said that they wanted one of these coolers.
Now imagine what the venture capitalist sees. In a proof of concept test, more than 50,000 people were willing to put money down now to get one of the first Coolest coolers off of the production run. What would people do if this product was available on a national or international level? That’s why more than $300 million in venture capitalism has been raised by businesses that were able to raise at least $100k through a crowdfunding effort.
Why Is Venture Capitalism So Strong Today?
Many feared that platforms like Kickstarter would replace venture capitalism, but that was an unfounded fear. The average household isn’t going to become a venture capitalist. They’re instead going to support projects or businesses that have a personal connection with them in some way. The average person isn’t going to invest $10,000. They might invest $25, however, and then when you multiply that $25 by 1000’s of similar backers, the crowdfunding potentially really begins to pay off.
This might change if the US government ever gets around to changing the rules about business equity. It seems to already be changing in the UK where rule changes have already taken place. Until then, however, Kickstarter will still be and likely always be the best friend of venture capitalists around the world.
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