Can Crowdfunding Solve the Startup Capital Gap?

No matter what industry it’s in or what product it’s selling, the absolute best way for a startup to obtain the capital it needs to grow is to generate revenue and reinvest profits. Of course, it’s easy to say that and very hard to do it. That’s why many entrepreneurs turn to friends and family for funding. These types of investors do not bet on the business so much as they bet on the person. And more often than not, these bets do not pan out, leaving angry family members and broken friendships at their wake. More recently, crowdfunding is being considered as a potential solution. Made popular by KickStarter, crowdfunding primarily works on a ‘donation’ model, whereby the ‘crowd’ of investors funds projects, including causes like liberating Egypt. Typically, incentives include discounted early access to products, or the opportunity to be a part of something significant. Currently in the United States, only the ‘donation’ model of crowdfunding is legal. In Europe, equity crowdfunding is also possible. Of course, the entire industry is waiting for the JOBS Act to become legal, which will allow crowds of investors to not only donate money, but actually invest via traditional equity models. Earlier […]

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