D.C.-based incubator, 1776, hosted another great event—New Tech for Raising Capital & Investing—with speakers including Paul Singh, Partner at 500 Startups and Founder and CEO of Indicate; Ben Miller, CEO of real estate investment platform Fundrise.com; and Sara Hanks, securities law expert and CEO of Crowdcheck.com.
“[Venture Capitalists] have a perverse view of the world. If you don’t make more than $100k a year, we think you’re shit.” -Paul Singh
Crowdfunding—a new(er) form of raising capital—borrows its name from “crowdsourcing,” the tactic that marketers employ to use its audience for inspiration on where a target market’s interests lie, and tailoring the marketing campaign on the simple premise – “Give the people what they want.” Crowdfunding is used in much the same way. People (potential crowdfunders) find a product they want, or an idea they believe in, usually within a startup community. And if the option is available, those people can invest in that product or idea at the entry-level.
So if your company isn’t making at least $100k (as indicated in Mr. Singh’s quote) you might find yourself looking for alternative means to fund your product or idea. Enter: Kickstarter – the world’s largest crowdfunding platform. The company’s stated mission is to help bring creative projects to life.
Other alternative means of finding capital is AngelList – a web-based platform that serves as a communal for investors and startups to meet. Although, you might not be well served getting “discovered” on AngelList. That bit is left for you and your constituents to provide. However, setting your product or idea apart will make a lasting impression on investors.
“The game of venture capital today is selection, not discovery.” –Paul Singh
As technology changes, so too does the way startups find capital. No longer is a startup’s success primarily contingent upon the effective “pitch” of their idea to VC’s and Angels. No. You, my friend, can take your product or idea to that new thing. You know! That thing they call the Internet. As Angels and VCs become more selective about their investments, the startup that walks into a meeting with crowdfunded capital has a much stronger negotiating position. The old adage “you have to have money to make money” still holds true today. And, simply put, investors just feel more comfortable investing when there’s money already behind what they’re investing in. Recalling what David Aames (Tom Cruise) stated in one of my favorite movies, Vanilla Sky:
“What is the answer to 99 out of 100 questions? …Money.”