In This Investing Battle, You're The Winner

By Matthew Milner, on Wednesday, July 23, 2014

With school out for summer, the trash-talking playground bullies have gone quiet.

But in the halls of early-stage investing, the zingers continue to fly.

The season’s most riveting grudge match?

The Old-School Venture Capitalists versus The New-School Equity Crowdfunders!

Today we’ll take a quick look at each side’s insults – and reveal our prediction for who’ll be the ultimate victor.

Pushing & Shoving

The Equity Crowdfunders trash-talk the venture capitalists (the “VCs”) for being old and stodgy, and for keeping ordinary citizens out of the “27% Club.”

They claim that crowdfunding is the new standard for early-stage investing.

Meanwhile, the VCs stick out their tongue at the Equity Crowdfunders for offering little value to entrepreneurs beyond money.

They say it’s only a matter of time before equity crowdfunding goes the way of the dodo.

But it really makes me wonder:

Why all the pushing and shoving in public – when, behind-the-scenes, these two “combatants” are borrowing each other’s business strategies and even teaming up?

Equity Crowdfunding Is Starting To Look Like… Venture Capital?

As equity crowdfunding matures, the funding platforms are starting to go beyond just offering capital.

Check out these three recent examples:

1. OurCrowd.com

OurCrowd doesn’t just “crowdfund” capital for promising start-ups…

Its investment team does deep research, invests the firm’s own capital into deals, and takes a board seat.

Those are the same value-adds as a traditional VC.

2. Alchemy Global

A new equity crowdfunding site called Alchemy Global focuses on the Sports & Entertainment market.

Last week, I spoke with their founder and CEO, Andy Brusman.

Andy, along with Alchemy’s President Peter Ruppe (Peter used to run Nike’s basketball business, including Air Jordan), recruited some of the most successful athletes-turned-businessmen on the planet to act as start-up advisors.

They brought in superstars like Greg Norman, Boris Becker and Jim Courier.

Sure, Alchemy helps start-ups raise capital – but just like a VC, they also help them build their operations, their brand, and long-term financial success.

3. HealthFundr

Healthfundr is a crowdfunding platform focused on health companies.

A few weeks ago, Sean Schantzen, Healthfundr’s co-founder and COO, told me about a new program they’re building called Healthfundr Expertise…

Basically, it’s an online resource for health start-ups. Professionals with expertise in the FDA approval process, for example, can offer insights to start-ups that are trying to bring a new drug to market.

The program aims to help start-ups mitigate their risk in a highly regulated environment. That’s similar to the value that a health-focused VC would bring.

As the three above examples make clear, equity crowdfunding platforms are starting to offer a similar value proposition as traditional VCs...

The type of value that’ll help start-ups and investors succeed.

Venture Capital Starting to Look Like… Equity Crowdfunding?

Meanwhile, venture capitalists are not so quietly stepping into crowdfunding.

Let's take a look at a few recent examples:

1. AngelList Syndicates 

AngelList, a prominent equity crowdfunding platform, recently launched a new program called SyndicatesWe wrote it about it here >>

The origin of the term Syndicate comes from a common practice among professional investors whereby one investor (the “Lead” investor) takes charge of a deal and negotiates the terms. Once he commits capital, he shares, or “syndicates,” the deal with a number of other investors.

In the case of AngelList Syndicates, the Lead investors are venture capitalists such as Brad Feld from Foundry Group.

Basically, these VCs are running mini venture funds on AngelList, and their potential investors include you.

2. SeedInvest + 500 Start-ups

A few weeks ago, a brand-name venture fund called 500 Startups opened its doors to investors like you.

500 Startups was eager to take advantage of crowdfunding to advertise its fund publicly, and to raise awareness (and dollars) from individual investors.

To pull it off, they partnered with SeedInvest.com, one of the funding platforms we feature regularly at Crowdability.

3. FundersClub “Partnerships”

Last week, top-notch equity crowdfunding platform FundersClub launched a new service called Partnerships.

Partnerships gives investors like you access to top venture funds – funds like Signature Capital whose prior investments include homeruns such as Google, Dropbox, and Uber.

So Who’s The Ultimate Winner?

The fight for early-stage supremacy isn’t over yet…

But based on the examples mentioned above, it’s clear that it’s not going to be venture capital versus equity crowdfunding…

It’s going to be venture capital plus equity crowdfunding.

Each side is taking the best practices of the other and incorporating them into their own model.

As it turns out, all that trash-talk is pushing everyone to improve their game.

So who’s the real winner?

You are.

Happy Investing!

Best Regards,
Matthew Milner

Founder
Crowdability.com

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Tags: Venture Capital Ourcrowd Angellist 500 Startups FundersClub Angellist Syndicates SeedInvest Dave Mcclure

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