Personal investments, Crowdfunding, Equity Crowdfunding, Series A, Angel Investing—when you’re trying to get a new business up and running, there are a ton of options for generating startup capital. The thing about having a lot of options is that figuring out which one is right for your situation can be a little overwhelming, so let’s take a look at one of the 4 major sources of startup capital available to aspiring entrepreneurs.
Have you got a cool idea for an app, piece of technology, wacky wavy inflatable arm-flailing tube man emporium, or inescapable level of crushing medical debt? If you answered yes to any of those questions, crowdfunding might be for you!
Since the late 2000s, crowdfunding has become America’s answer to the age-old question: “who needs universal healthcare? The system works great!” After originally entering the online marketplace as a way to fund artistic and musical products without the backing of record labels or residencies, the launch of IndieGoGo in 2008, Kickstarter in 2009, and GoFundMe in 2010 really helped kickstart (get it) crowdfunding’s popularity as people quickly realized that they didn’t have to convince a bank that their dreams were viable, just a bunch other other people.
In the years since, crowdfunding has become an extremely popular (and occasionally profitable) way for companies to raise money from non-institutional, non-accredited investors—or as I like to call them, normies.
There are all kinds of success stories. The independent video game Star Citizen launched the highest-funded crowdfunding raise of all time in 2012, and in the 10 years since has collected over $400 million from public investors, despite the game never actually releasing or becoming available in any way. Other notable successes include:
- The Oculus Rift VR-entertainment headset, which raised over $2.5 million dollars from its 2012 Kickstarter raise, and would later be purchased by Meta (neé Facebook) for $2 billion.
- The massively popular online Dungeons & Dragons streaming series Critical Role, which raised over $11 million for the development of its animated series The Legend of Vox Machina, which is currently available on Amazon Prime Video.
- Some internet hero named Zack “Danger” Brown, who raised over $55,000 to make potato salad. Yep. Potato salad. Can’t make that up.
Suffice to say, the possibilities available through crowdfunding are nigh on infinite, and for a lot of enterprising entrepreneurs who have a dream that they want to make a reality, it provides a very real opportunity to source startup capital from a community of people who are passionate about your product.
From an investor’s perspective, it can be a bit trickier—maybe you invest a thousand dollars in a video game that claims it will revolutionize the industry, and now here you are, 10 years later, desperately clinging to shreds of news and rumours hoping that you won’t have to listen to your dad’s smug comments about how you should have invested in something stable and reliable like an S&P 500 Index Fund like an adult.
Or maybe you got your Oculus Rift and realized that it combined the immersive experience of 2012 graphics with the heft and sensation of wearing a scuba mask on dry land. For investors, crowdfunding is more of an investment in an idea than one that offers a financial return. You support the projects that you believe in, and if you’re lucky you might get a nice new set of space goggles.