Equity crowdfunding, which involves raising funds from both accredited and unaccredited investors, has emerged as a viable alternative to venture capital for startups. In recent years, it has gained significant popularity due to the challenges in accessing venture capital, and regulatory changes that allow companies to raise larger amounts of money at once.
Despite its growing prominence and the benefits it offers to startups, many venture capitalists (VCs) continue to express negative views about equity crowdfunding. Traditional investors often perceive it as a last resort for startups that are unable to secure venture funding. They argue that the capital raised through crowdfunding lacks the value that an investor brings, such as their network for hiring and connecting with customers, as well as their mentorship and experience.
However, startups that have utilized crowdfunding assert that VCs are simply biased in favor of their own interests. Chris Lustrino, the founder and CEO of crowdfunding data platform KingsCrowd, believes that crowdfunding goes beyond just raising capital. According to Lustrino, KingsCrowd has successfully attracted repeat investors, customers, and even talent through their crowdfunding campaigns. He also points out that numerous other startups have experienced similar outcomes.
Lustrino challenges the notion that venture capital provides unparalleled value-add. He argues that VCs are motivated to maintain their monopoly in the startup funding landscape.
