Equity crowdfunding, or raising funds from both unaccredited and accredited investors, can be a great alternative to venture capital for startups. The strategy has become significantly more popular in recent years now that venture capital is harder to come by, and changes in regulations allow companies to raise more money at one time.
But even though crowdfunding is growing in prominence and offers a whole host of benefits to the startups that choose it, many VCs continue to talk negatively about the strategy. Many traditional investors feel equity crowdfunding is only for startups that can’t raise venture money. And they even deem capital raised this way as just cash that lacks the value an investor brings, be it their network that can help with hiring and connections to customers, or their own mentorship and experience.
Still, startups that have been down the crowdfunding road say that VCs are just talking their own book.
Chris Lustrino, the founder and CEO of crowdfunding data platform KingsCrowd, thinks crowdfunding definitely isn’t just for raising capital. KingsCrowd has been able to get repeat investors, customers and even talent from their crowdfunding campaigns, he told TechCrunch+, adding that he’s seen numerous other startups do the same.
“I would argue that the venture capital value-add is next to none in reality,” Lustrino said. “They want to hold on to their monopoly.”
