In a recent chat with my angel investor friends, they told me they have noticed that many investors are turning to crowdfunding platforms in search of viable projects, especially in consumer technology and related fields.
They believe projects that are oversubscribed on crowdfunding platforms will have better chances of being welcomed by consumers once they are launched.
The venture capital investors will contact the team in charge of those projects under the table to make a SuperAngel round of investment or maybe in the pre-A round of financing and later rounds.
High-net-worth individual investors behind the VCs have a very different profile from that of crowdfunding platforms. They are positioned differently by nature.
Nevertheless, some crowdfunding platforms with VC concepts are emerging. CrowdBnk in the United Kingdom is one example.
CrowdBnk has a veteran investment team that screens the projects. After a series of Q&As, it holds a bootcamp to test the project or conduct due diligence. It makes sure all the projects are outstanding.
It invests its own money in those projects, which later raise money on the crowdfunding platform. In other words, the platform’s interest is in line with the investors on its crowdfunding platform.
Since it was founded in 2013, CrowdBnk has recorded a high ratio of successful crowdfunding cases. It has so far raised more than 32 million pounds (US$45.9 million) for the projects at an average of 810,000 pounds per project. Such model has a good potential.
With such successful examples, many crowdfunding platforms are considering introducing VCs into their platforms. Last year, Seedequity.com, a crowdfunding platform under American broker Seed Equity Ventures, raised US$8 million to US$10 million for the projects listed on its platforms and incubators.
But sometimes conflict of interest exists in such structure. As it earns both trading fees and fund management fees, it may tend to allot more money for startups on its own platform, rather those on a third party platform.
With rapid development of crowdfunding platforms and various combinations of VC and crowdfunding models, the methods to raise money for startups will be changing rapidly.
This article appeared in the Hong Kong Economic Journal on Jan. 29.
Translation by Myssie You
[Chinese version 中文版]
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