For startups, making the decision to work with an angel investor or crowdfunding is one that can be hard to make. To understand which one complements the financial framework of your startup, you will need to understand what is angel investing and crowdfunding.
Angel investors are typically individuals or a small group of people who invest in vibrant, promising companies and organizations. Angel investors are particularly influential for startups then need capital. Angel investors are willing to risk their capital for business owners who haven’t had the chance to generate a track record.
Crowdfunding, also called crowd source capital, involve the cooperation of a large group of people who will invest to help a business grow. Unlike angel investors, crowdfunding is typically a orchestrated, group effort.
Crowdfunding Versus Angel Investing
One of the benefits of working with Crowdfunding is that a startup can obtain funds without giving away stock or equity in return. In return for investing in your company, crowdfunding gives back via rewards. For example, if a member of the Crowdfunding group invests a particular amount, you can give them certain perks, like having early access to a product. For startups, it is important that they are cognizant of associated fees when working with Crowdfunding. Many platforms charge a fee just for you to work with them. Some of these fees are variable percentages that increase with the amount funding that you have secured.
Even though angel investors are able to fund projects and startups that are particularly nuanced, they tend to gleam over ideas that may not offer immediate profits. Angel investors tend to have choices, and they will overlook a company if they did not relate with it or they cannot find a profitable reason to invest. There are about 4 million potential angel investors, and they want to use their money intelligently. If an angel investor likes your product, then you might have found a very secure and robust source of funding. Keep in mind that angel investors will secure equity in your startup. This means that you will have to give up a portion of the control.
When it comes to selecting the right startup funding, you need to be well aware of the profitability of your product and how unique it is. If you are creating a product or service that has a similar idea to yours then it might not be unique enough for angel investors. Crowdfunding may be a more viable option.
To learn more about securing the right funds for your startup, contact us. Stay ahead of trends by following us @bigfishcapital.