Investment Crowdfunding and The Future of Venture Capital
CEO of We funder from these dozens of investment crowdfunding platforms only a few really matter. They include AngelList, We Funder, FundersClub.The reason these platforms are winning it is because they eliminated the downside risk for the startup founder and he/she can get crowdfund money in multiple ways. They create a one purpose vehicle for anyone around to be able to invest any amount possible. It’s like one big angel investor.
Nick also notes that the crowfunding industry is not very innovative and also has it's merits and demerits.
The pros have to be that the wealth outside of Silicon Valley can now be invested in startups with a potential 1B$+. The nets have been cast wider and it will be easier to help more startups raise money.Secondly, a minimum of 1000$ dollars can now be invested instead of 100,000$.This definitely levels the playing field for many who would have liked to invest in startups before but couldn’t. A few years ago that wasnt possible.
There are however some things holding back the industry.For all those funds conducted so far by WeFunder there is limit of 99 investors who can crowfund.Generally the crowfunding platforms can’t advertise too. Nick compares this scenario to an e-commerce website but you have to hide the buy button until after the user has logged in. Crazy huh?
Additionally one has to be accredited by US law in order to invest in startups. They have to have $1M in net worth or earn $200K or more per year in income. This therefore excludes most of humanity from participating in this crowdfunding platforms.
However the future looks bright in this space as Nick predicts in a few years users of platforms will be able to crowfund and help the startups raise money. A nice example would be Uber crowfunding just before they IPO just to reward their loyal users with stock.
For indepth details on this topic, save some minutes and the watch the video below by Nick Tomarrello at Startup Istanbul 2015.