Venture-backed startups make headlines, but they’re far from the norm. For the average startup, funding rounds are generally limited in frequency and conservative in the amount raised.
The truth is, most startups either get acquired, fail after fundraising, or fail to raise funding entirely. And those that successfully raise a round of funding are by no means guaranteed to raise another.
In this article, we cover the common startup funding rounds, details about each round, and an example of a startup navigating the valuations and dilution of each round.
Crowdfunding was initially used as a way for artists to fund their projects and engage their audience, even when that audience was relatively small.
Kevin Kelly, author and founding editor of Wired, had the concept for crowdfunding in his essay 1,000 True Fans. Originally written in 2008, he advocated for people to focus on building relationships as a means of building business.
Today, millions of people use crowdfunding platforms to finance their projects, products, and businesses. If you’ve backed a project or creator yourself, explored the possibilities of raising money through crowdfunding, or have never even heard of crowdfunding, this article is for you.
So far in our guide, we’ve covered the most common forms of crowdfunding in chapter one, the benefits of rewards-based and equity-based crowdfunding in chapter two, and how to crowdfund successfully in chapter three.
One chapter this guide is sorely missing (as you might have anticipated given the name of our company) is what equity crowdfunding even is, so let’s get right into the question on everyone’s mind:
What Is Equity Crowdfunding?
Equity crowdfunding allows corporations to raise capital from accredited and even non-accredited investors in exchange for a percentage of equity in the company at an amount and valuation of the company’s choosing.
So how can you guarantee a successful crowdfunding campaign? Although there are no guarantees, what you can do is follow the blueprint of what has been successful many times over and avoid the pitfalls of the unsuccessful campaigns.
Crowdfunding has changed the game for creators, businesses, and even the general public. Not only can businesses use crowdfunding to tap their target audience as a source of funding, but dedicated customers can now become owners in addition to brand ambassadors.
As we discussed in our previous chapter, What Is Crowdfunding?, crowdfunding is the ability for businesses to raise small amounts of funding from a large number of sources. Depending on the type of crowdfunding platform, the investors could receive a product or service in exchange for their participation in the campaign, or they could receive interest income, equity, and more.
Even if you’ve never started a company before, you’re likely aware of how expensive business ventures can be.
You hear about companies X, Y, and Z raising round after round of financing without even a semblance of profit. Who’s willing to fund these startups and small businesses to the tune of tens or even hundreds of millions of dollars without the certainty of return?
Knowing how to find private investors for business is essential and something serial entrepreneurs innately understand. But if this is your first time considering a fundraising strategy, you’ll want to understand why private investors exist, what the various types are, and how you can find and connect with them.
Fundraising takes time. Just how much time depends on your approach. Traditional fundraising methods, like applying for business loans or pitching to angel groups and venture capitalists, are still very effective ways to raise capital for your business if you have access to them, but the fact is most American entrepreneurs – including those who have completed their fundraising checklist – don’t. Even if you do, these methods can take upwards of six months to close and require a lot of legwork that’s just not necessary in today’s business world.