Crowdfunding might be the solution funding problems, but too much could crowd out institutional investors

The Crowd

The Crowd

Start-ups and early stage businesses have usually been the territory of the three f’s: friends, family and fools. Typically, when the f’s have been exhausted, the projects that survived and still show promise would turn to institutional providers – banks, debt providers and venture capitalists. However, these sources have effectively dried up over the last two to three years. At the same time, a new fourth element has emerged to add to the three f’s: crowdfunding. A combination of the decline of institutional funding and the emergence of crowdfunding, has the potential to change the entire funding landscape at the early stage.

Crowdfunding is the process by which large numbers of private individual funders are connected through a web-based platform to projects and businesses that need funding, typically at a relatively early stage. Such funding covers a wide spectrum from simple donations through loans to equity investment.

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