How sturdy is your business strategy? There are always sinkholes…
New research is showing a link between success on crowdfunding websites like Kickstarter and more traditional money raising methods. Research conducted by the CB Insights firm shows that projects for new hardware that managed to secure at least $100,000 each on a social platform collected a whopping $321 million from venture capitalists later on down the road. Investors are using the whims of the crowd to find investments worth spending money on.
Early detractors of the crowdfunding phenomenon predicted it would either fail spectacularly or replace traditional investment fundraising all together. Both concepts are proving to be off the mark as successes on Kickstarter go on to court big name venture capitalists as well. The indication of consumer interest shown by the crowd is a sign to the investors that the idea is worth their attention.
Despite the massive amounts of money raised for hardware projects like the Oculus Rift, these startups still need more funding to expand their operations as demand grows. This is where more old-fashioned funding comes into play. Most crowdfunding platforms only allow a project to raise a single round of money for the initial setup, so companies turn to private equity firms and VC platforms to keep them going while production costs and shipping concerns pile up.