Whether you’re a small business or a large corporation, finding funding is always high priority. In this day and age the type of funding you get is just as, if not more, important than the size of the funds themselves. The two major ways to gain capital are Crowdfunding and Venture Capital Funds. As a business seeking funds, there are a few things to consider before committing to a definite plan of action.
What is Crowdfunding?
Crowdfunding is the act of funding a venture or project through a large quantity of people giving at different levels! This type of funding is usually done using social and traditional media platforms. There are different kinds of crowdfunding which makes this choice easily customizable to your business and its financial path.
Donation Based Crowdfunding
Donation based crowdfunding is 100% capital to your campaign and the projects it’s funding. This type of crowdfunding is common amongst nonprofits. It also allows for a broad audience, and the opportunity to really focus on and showcase your mission.
Reward Based Crowdfunding
Reward based crowdfunding is essentially donation based at the price of a reward or price of a contribution. These rewards are usually and most effectively version of the service or product your business provides.This type of fund seeking promotes interaction, identification and retention of current and potential clients! All at little to no expense!
Equity Based Crowdfunding
Equity based crowdfunding is a bit more … intimate. Individuals or groups give funds in return for a piece or share of your business. At this point the groups or individuals are invested in your business or organization based on the time and amount of capital agreed upon. This provides the perfect opportunity to build relationships with other business and even gain mentorship!
With the development and constant evolution of the internet, specifically social platforms like GoFundMe and Kickstarter, crowdfunding has become more customizable, targeted and accessible than ever. It grants your mission a voice and a hand to reach out to your audience. It promotes a sense of community and involvement at every and any level. That being said, it is not the most time efficient and cost effective way of doing things!
What is Venture Capital?
Venture Capital a source of funding usually given to companies with a proven and/or predicted high and rapid success rate and a low rate of risk. This funding can come from corporations, foundations and even wealthy individuals, by way of a Venture Capital Firm. A return on investment is usually expect within an average of 5-10 years, so It’s important to have a clear plan of action.
Being part of a business accelerator, like the Naples Accelerator, is a great way to be introduced to potential venture funding sources. Our members are given the tools and support to put together a strong pitch to local funding sources such as the Tamiami Angel Funds and the Adrenaline Venture Fund.
Benefits of Venture Capital
Venture capital usually gives investors the opportunity and license to have a hand in the direction of the business. For this reason, it’s ideal to have a firm and sponsors who express great interest in your mission and share similar business values.
This option is wonderful when it comes to networking and mentorships! Venture capital funding can put you in the room with some of the most capable professionals in the world of business and finance in the industry. The funds from venture capital are usually more stable and consistent than that of crowdfunding. Long lasting relationships are formed that stay with that company passed the businesses infancy.
Both Crowdfunding and Venture Capital have their pros and cons, but ultimately an entrepreneur’s decision should be based on what is best for your business and your mission. The needs and goals of every business is different and should not be funded in the same way.