Venture Capital vs Crowdfunding


The goal is to raise money for your company, your product, or your service. You’ve got several ways to do this today, but the two most popular are crowdfunding and venture capitalism. With VC, you’ve got a secure investment that doesn’t require as much work, but in return you sacrifice a portion of your overall valuation. With crowdfunding, you have more backers, but you don’t sacrifice any equity unless you’re specifically doing equity fundraising. Which would you choose as an entrepreneur?

Investment Marketing Changes the Dynamic

A VC can bring in a lot of cash for a company with a good concept, but the venture capitalist must also eventually make money from within the company to make it a good investment. Through crowdfunding, the emphasis shifts from a need to have massive singular selling moments to one that requires continuous investment marketing. By emphasizing strong marketing techniques, it becomes possible for a crowdfunding campaign to raise more than a VC can bring in – without the equity risks.

Working with a VC also generally means that you’re not going to get a fair appraisal. A VC has one goal in mind: profit. They’re not going to invest in the way you want them to invest unless they are absolutely desperate to get involved with your business plan.

Your current valuation also becomes problematic, especially if you are a start-up. If you’re working on an initial idea that has a proof of concept, but no real sales, then you don’t have much in tangible value. A VC will take advantage of this and give you cash, but at a steep equity price.

Your Merit Isn’t Judged By Venture Capitalism

Most companies don’t actually generate venture outcomes. That doesn’t mean that they can’t be profitable or even generate early revenue. A business can go on forever with limited expenses and a philosophy of living within your means. Expand when you can using your own revenues as a basis, get some help through crowdfunding, and you’ll never need a VC.

Venture money is used when you want to grow fast. Sometimes this needs to happen when you’ve got a great product on a broad platform and a limited introductory window. Even then, however, VC will limit your options because you’ve got more owners with a piece of the pie. Sometimes slow and steady growth that you can control through your own business savvy and a crowdfunding campaign or two through investment marketing is better than VC revenues.

Investment marketing through crowdfunding can achieve a fair amount of growth without the sacrifices of venture capitalism. That’s why crowdfunding is the most viable options today.