The New Way Of Raising Capital

1517 Words Aug 21st, 2015 7 Pages
Traditionally, one of the most difficult part for an entrepreneur to turn their idea into reality is raising capital. However, with the recent technology boom and a society that gets euphoric from new ideas, entrepreneurs now have a plethora of new ways to get their company funded, with crowdfunding as the most recent new way of raising capital. Crowdfunding is a tool, typically done via the Internet, that will allow any entrepreneur to attract a large number of individuals to invest small amounts of money into their business idea. If the entrepreneur’s funding target is met, rewards are offered to backers.

Historically, venture capital firms and angel investors played a paramount role in the early stage financing for startups. However, crowdfund investing has become increasingly popular for many reasons to be explored later in the paper. With increased competition in the capital raising field, the startup environment is changing so radically that one of the most recognized venture capitalists, Fred Wilson, suggested that “venture capital could be swept away altogether by a flood of crowdfunding money” (Kantar, 2014). According to Fred Wilson, he estimates that over time, Americans will eventually invest 1% of their assets through crowdfunding, equating to around $300 billion (Caldbeck, 2014). This amount 10 times greater than the $30 billion that VC funds have deployed per year, on average. (Caldbeck, 2014). The question begs: will crowdfunding crowd out venture…
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