Skip to main content

Crowdfunding: The better business incubator?


In June, Oculus showcased its VR Rift Development Kit 2 headset at the E3 Electronic Entertainment Expo in Los Angeles.
Oculus and others are proof that even after the crowdfunding process ends, money continues to change hands. 
Last month, for example, LIFX, whose Wi-Fi enabled multicolor LED lightbulbs raised $1.3 million from backers in November 2012, secured a $12 million Series A funding round led by Sequoia Capital (bringing the company's total equity funding to $16.6 million).
Formlabs, whose 3-D printer reached its goal in three hours in 2012, ultimately raising nearly $3 million via crowdfunding, received $19 million in Series A funding in the fall of 2013. That same year, the OUYA game console secured $15 million from Mayfield Fund, Kleiner Perkins Caufield & Byers and others. And Pebble, a smartwatch developed by Pebble Technology that was rejected by numerous venture capitalists, later picked up $15 million from Charles River Ventures after its enormously successful Kickstarter campaign.
One of the advantages of a successful Kickstarter is it gives companies a chance to clearly demonstrate the demand for their product. The consumer investment they attract to help refine and move their product closer toward a finished state means angel investors and venture capitalists don't have to risk as much capital.
"Proof of demand is nice, but the funding to support the early product development is even nicer," said Brad Feld, an early-stage investor and managing director of Foundry Group. "It means that start-up can get a hardware product further down the road—more of an MVP equivalent in software—before going out to raise money."

A virtual testing ground

Crowdfunding in and of itself, though, isn't yet a preferred screening tool for many venture capitalists, although they do acknowledge it has its advantages.
"There are a variety of factors that go into an investment (team, market, product, etc. ...) and I would say that crowdfunding campaigns provide an additional factor, but they do not really outweigh the others," said Omar Hamoui, a partner at Sequoia Capital. "Showing proof of demand is the key advantage. Even with this, though, we frequently think about whether crowdfunding results are proof of deep and enduring demand or whether it is a shallow pool of early adopters."

http://www.cnbc.com/id/101845283

Comments

Popular posts from this blog

Best IELTS and English language training institutions in Hyderabad

IELTS stands for International English Language Testing System. As the name implies it is basically an English test for testing the proficiency of the language in an individual.  Training for IELTS can be taken to pass the IELTS exam or to develop good english language skills. I am giving the training institute addresses for Hyderabad. The test system is jointly managed by the British Council,IDP education ltd and University of Cambridge ESOL Examinations and more than 1 million candidates are taking the exam all over the world. The test has two versions : 1. Academic 2. General training Academic  version is for people who plan to continue their higher education by enrolling in universities in countries like US,UK,Australia,Canada,New Zealand etc.The academic institutions in these countries consider the IELTS score as a criteria for the admission process. General training is mostly for immigration purposes in countries like Australia,New Zealand,Canada etc. It may ...

How to use home loans most effectively for tax benefits

1) Deduction on interest: If you are paying EMIs for a home loan you took to buy a house, the interest component in the EMI can be claimed as deduction. You must be both an owner and a co-borrower (in the loan) to claim tax benefits. This deduction can be claimed starting the year in which the construction of the house is completed. Suppose the construction of your house was completed on August 30, 2014, you can claim deduction for interest for the entire 12 months in financial year 2014-15. So every year a maximum of Rs. 2 lakh can be claimed for a house that you use for your own residence. If your house is rented, the entire interest for the year can be claimed as deduction. The interest payments for the year shall result in a loss under the head 'income from house property'. This loss can be adjusted against in the same year against other heads of income in your income tax return including salary. Therefore, it reduces your total taxable income and the tax you pay thereon. A...

Intellectual battle against ISIS as important as Military: Sheikh Makhtoum of Dubai

The global financial crisis taught the world how profoundly interdependent our economies have become. In today's crisis of extremism, we must recognize that we are just as interdependent for our security, as is clear in the current struggle to defeat ISIS. Mohammed bin Rashid Al Maktoum, VP and prime minister of the UAE, ruler of Dubai If we are to prevent ISIS from teaching us this lesson the hard way, we must acknowledge that we cannot extinguish the fires of fanaticism by force alone. The world must unite behind a holistic drive to discredit the ideology that gives extremists their power, and to restore hope and dignity to those whom they would recruit. ISIS certainly can – and will – be defeated militarily by the international coalition that is now assembling and which the UAE is actively supporting. But military containment is only a partial solution. Lasting peace requires three other ingredients: winning the battle of ideas; upgrading weak governance; and ...