Freitag, 8. März 2013

Crowdfunding Fills Gaps

How Crowdfunding Fills Gaps Created by the Venture Capital Industry

by David Brown
co-founder and director of operations at Smart Money Entrepreneurs

2013 presents more than an opportunity for small businesses and investors. In 2012, we saw the exponential growth of crowdfunding investments around the world. Never before have entrepreneurs been able to raise such a significant amount of capital to jumpstart their businesses.

People want to invest in entrepreneurs – why stop them? Individual investors are realizing the power of directly investing in startups that have a plan and a vision. That is why the global crowdfunding industry experienced a 91 percent growth in investments from 2011 to 2012. Industry analysts estimate that the industry will grow from $2.8 billion to at least $6 billion in 2013. That is $6 billion for innovation and job creation. 55 percent of that growth will take place within the U.S.

Venture capital firms, also known as VCs, have created gaps in the startup industry that venture crowdfunding can now fill. Those gaps are inefficient use of startup time, lack of startups being funded, lack of diversification in the industry, and lack of transparency in startup investments – an important issue that’s rarely mentioned.

Inefficient Use of Startup Time

Early stage startups need to spend more time building their startup, and less time searching for seed capital from a venture capital firm. Over the last 50 years, VCs have done a great job at selling their value added services, and now startups almost immediately seek VC funding when looking to grow. Unless soliciting advisement, any time spent not building a startup past the seed stage could arguably invite a lower return on invested time. Read more