Technology has had a huge impact on the way we interact with one another. For businesses, the Internet has increased their reach in terms of customers, partners and even investors. In fact, it has even brought about a whole new investing concept — crowdfunding.
But while crowdfunding presents an interesting opportunity for some startups, it might be negatively impacting others. For those entrepreneurs looking for larger investments from more traditional sources, the same factors that help crowdfunding campaigns succeed don’t necessarily apply. And that can lead to some misguided assumptions for entrepreneurs seeking funding.
Joanna Schwartz, CEO and co-founder of investment platform EarlyShares included some of those common misconceptions in a post for Entrepreneur. She said that today’s entrepreneurs tend to overestimate their offering’s potential to go viral, its mass appeal, and the immediacy of need for such an offering. Schwartz wrote:
“The truth is that while virality, mass appeal and urgency lead campaigns to success in the world of rewards-based crowdfunding, they’re not core tenets of general solicitation efforts. Both fields fall in the family of online fundraising, but crowdfunding and general solicitation are more like cousins than siblings.”
What this means is that you can’t pitch a startup to crowdfunders and general solicitation investors in the same way. The main difference, according to Schwartz, is that for general solicitation investing, people are more apt to invest in people. Sure, the information you present online might draw them to your business. But investors will still want to know more about your background and track record before making a commitment.
So while factors like mass appeal and virality shouldn’t necessarily be discounted, it’s important not to focus too much on them when looking for general solicitation investments. The factors that appeal to certain investors won’t appeal to others. So if you present information accurately and provide an open line of communication with investors, you can tailor your pitch to their particular needs.
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