There are multiple avenues to take when looking to fund your next project. Neither path is easy and will take lots of effort to be successful. In this article, we will explore which path may be more suitable for your next project.
The scenarios
Both methods can work, but when it comes to your goals, and what you already have to work with, each project can be handled differently. If you have already formed an established company and would like to invent/create a new product, then choosing something like venture capital would likely not be suitable for your specific project. Using the same example, it would be beneficial to use Crowdfunding to test the market and use a presale feature by offering rewards in your Crowdfunding campaign to introduce your new project. Another reason why using Crowdfunding for your company is great, is that you may not be giving away equity to your company. Whereas using VC’s, you may find yourself losing control over your company. Only using the rewards/donations or ICO based Crowdfunding campaigns will you protect yourself from losing equity into the company. There is typically a fear of losing equity in the company by many founders.
For those that can afford to lose equity in the company, and want to generate large amounts of money (in the millions) for your project, then searching for the right VC would be more suited for your scenario.
If you are an individual with a big vision for your product, you can use this information, to determine which method is best suited for you. As both avenues have good reasons for this particular scenario. You as an individual have a lot of responsibility when trying to create and fund this project. You may or may not have a team available, and when creating a Crowdfunding campaign, having a team can make a world of a difference.
Why choose Crowdfunding?
There are many reasons to choose Crowdfunding. Below are all of the reasons why someone would want to choose Crowdfunding as the suitable method:
- Test the product in a real-world environment
- Utilize presales
- Keep equity in your company (depending on the Crowdfunding model)
Why choose Venture Capital?
Although this is more of a traditional funding method, it is still a good solution. Below is a list of reasons why you should use Venture Capital:
- Gain larger amounts of capital
- Have the ability to connect with investors in your industry
- Those who fund your project can also help you succeed by using their connections
There are many resources to help with both funding methods. There is not always a right or wrong choice when it comes to using a funding method.