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Saturday, February 18, 2017

Financial Investor Comparison


“Angel investors,” “venture capital,” and “private equity” can be grouped together as “financial investors.”

Before equity crowdfunding, they were just about the only ones willing to take a risk on early-stage companies.

Those who get a financial investor gain a valuable partner, along with their money.

This active role is one reason why some companies prefer financial investors to equity crowdfunding; they get to deal with a small number of large investors, who are highly incentivized to drive the company forward.

“There are times where a startup would be better with angel or VC funding,” admits Yannig Roth of WiSEED, “If your business is not the kind that can expect much traction from a public campaign, or if the benefit your company offers is tricky to explain in a sharp and crisp manner, it could be a lot of effort better spent on talking to financial investors.

If you have a great company being highly sought by VC, you could get the money with less effort.

But don’t forget that crowdfunding offers more than just the money – it offers engagement, visibility and advocacy too”.

The marketing effort is much larger in the typical equity crowdfunding campaign, and if you can get money quickly from a financial investor, then that saved time can instead be put towards other business efforts.

For a lot of startups, though, the idea of a financial investor is anathema to their company culture.

Alicja Chlebna runs Naturalbox, which delivers ethical, organic snacks, health and beauty products. “No banker would share the passion I have for my business.

And most venture capitalists are pretty arrogant, greedy and difficult to work with, from what I know.” Strong words, but Alicja isn’t alone in feeling this way.

Now, let’s be clear that not all venture capitalists fit this description. There are a lot of great people in VC that generate win-win environments for themselves and the companies they work with.

But nonetheless it must be said that the industry is still mostly male, and tend to come from similar backgrounds — elite universities, and the corporate world.

It shouldn’t be surprising that among the melting pot of diversity that entrepreneurs represent, some won’t gel well with people from this “VC culture.” And these entrepreneurs are not necessarily less worthy of being funded – but until now, if they needed funding, they haven’t had much choice but to submit themselves to a culture they don’t identify with.

Retaining full control of their culture is one of the real advantages of raising money through crowdfunding.

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