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02-10-2017 - - 0 comments
Your best ticket to VC funding? Tom, Dick and Harry

For the more sophisticated entrepreneur, crowdfunding can be a chore. Why strut your stuff in front of an uncaring public – who may throw $100 a piece at your idea - when you could be gladhandling clever, sophisticated institutional money?

Well, the odds of securing that dream VC “dream ticket” are often slim. Yet they can be enhanced. Execute a successful crowdraise, and the venture capitalists will be more likely to follow suit.

Thus goes the conclusion of a recent Crowd-to-VC research piece from business professor Roma and colleagues.* In it they assemble 105 technology startups on Kickstarter with $50k or more in backing and study the companies’ subsequent Series A / B success.

While only 30% of the sample managed to raise VC funding, those who did were often the ones that had attracted more pledges from the public. Those pennies can get you dollars later down the line!

But VC’s don’t simply scroll the hall of fame of Kickstarter. The “A star” crowdfunder graduates were only able to improve their odds with institutional capital if they had also locked down patents for their invention and had access to sizeable social capital – as measured by Linkedin connections.

The takeaway? A crowdfunder can be an important door-opener, but you still have to demonstrate your organisation’s viability : be that the protectability of your product or your access to the right people.
Not necessarily that which Tom, Dick and Harry get excited about.

Roma, P.; Petruzzeli, A.M., Perrone, G. (2017). “From the crowd to the market: The role of reward-based crowdfunding performance in attracting professional investors”. Research Policy

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