Is your startup suitable for VC funding or crowdfunding?
Choosing the right funding for your startup or new business should never be a decision on the spur of the moment, or an easy one. In order to make sure you’ll have success, an ongoing progress and activity, that you’ll break through the market and create a name for yourself, and even scale out and go global, you need to consider this as sensibly as you can. The right funding depends on your product/idea/startup, on your public/audience, on the scale of your business and future investment, on the market you want to draw in, on your plan for developing in the long run, etc.
That’s why I thought it of great importance to know for sure and decide whether what you need is crowdfunding or VC funding.
My aim here is to discuss the differences between the two types of funding, and how and in which cases they can either benefit or harm your startup. If you want basic clarification on crowd-funding and VC funding, read Funding your startup is now a piece of cake!( you’ll find all that you need to know just at a click away 🙂 )
The choice between crowd-funding and VC funding depends on your type of startup
In his great post, Crowd-funding vs. VC seed rounds: Which makes sense?, that I especially like because of the interesting and new way in which he classifies the types of crowd-funding( which I mentioned in the article on funding your startup), Lee Hower suggests that crowdfunding is a good option if you have a product to launch, which also has some physical hardware component. Moreover, if your company is not designed for VC funding, if it does not have the potential to reach VC expectations of scale, then crowd-funding might be the next best decision. By crowd-funding you can raise a small sum of money early on, putting the basis for your startup. Project crowdfunding can be also very attractive because it helps you identify and connect to early adopter customers, who can give you feedback and become loyal to your future brand.
Even so, after raising some money by means of crowd-funding, you can choose to opt for a VC round at the Series A or B stage.
However, the average amount of money raised by crowdfunding is around $10.000. So, if your goal is to raise a substantial sum of money and you don’t have in mind a consumer product, you should opt for VC funding. Venture Rounds are perfect for tech startups with the potential of building a business up to Venture stage, so, to have the potential to get great sums of money, such as hundreds of millions or billions of dollars, in 5-10 years.
Decide carefully and with precaution
The fact is there is no turning back, whether you go for crowdfunding or for VC funding, once you make a decision, you can’t go back. So, you stick with it, that’s why it’d better be good. Take into consideration what’s best for your startup and then strike a deal. You will find it worth your time.
What do you think? What would you opt for?
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