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Adapt or Die
Posted on 14th July 2012 By admin

Venture capitalists are increasingly wary of the new Crowdfunding for equity industry unleased by the JOBS(Jumpstart Our Business Startups) and rightfully so. Crowdfuning takes the power away from a single or small group of individuals and shifts it towards a large number of peers, totally changing the investment capital landscape.

Rather than having the terms of capital financing being determined by venture capitalist, startups can now dictate how much control is given up and determine the creative direction of the venture. Until now, most VC’s have had very little competition in this area and have had a major say in how the startup idea is executed along with which ones would even be given an opportunity.

Crowdfunding over four forms: equity based, donation based, lending-based and reward-based, has raised over $1.5 billion internationally in 2011, the majority of which has come from the equity-based investments. The prediction is that number will double by the end of this year. Once the SEC formalizes its rules for the United States by December 2012 the growth is bound to skyrocket.

Most venture capitalists scoff at the mere mention of crowdfunding and do not see it impacting their firms in the least. If the growing trend of crowdfunding investing continues at it’s current pace, venture capitalists may end up loosing their foothold in the startup industry unless they adapt and change the status quo. Equity Crowdfunding is less than a fad and there are major changes on the horizon in the United States starting in 2013.

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