What can you look at if traditional channels let you down It is not a secret that we live in an era of abundance, and money is certainly abundant out there. What sometimes is missed is a way to channel them toward specific objectives and activities. I am actively involved in fundraising work with both startups and a venture fund, so this is a problem I am seeing nowadays more than ever. And whether you are raising money from a VC (entrepreneurs) or LPs (investors), you might be glad to know that other ways exist to obtain the money you need to run your company. The following methods are surely a partial list of the ones existing, but I am in search mode for new innovative ways to efficiently channel money, so if you have ideas or saw something interesting please comment below and let me know. Crowdfunding Image Credit: https://it.depositphotos.com/portfolio-2877797.html Well, this is not exactly new but is worth to mention and talk through in a more systematic way. Crowdfunding is a way to pull and pool together small amounts of money from a multitude of (usually small and not-sophisticated) investors. To my knowledge, there are at least six different types of crowdfunding (borrowing this classification from — read his book by the way, very interesting if you want to get into angel investing): brian cohen a way for not accredited investors to buy an infinitesimal equity stake in a startup; Equity crowdfunding: a peer-to-peer lending example where the entrepreneur borrows money from those small investors and agree to repay the loan if the company starts off; Debt crowdfunding: the investment is still small in the reward-based model, but the money is directed toward social projects and usually the investor gets rewarded with a perk or a symbolic token; Reward-based crowdfunding: this is a donation-based type of funding where people donate money to support a project that usually has some ethical or moral implications; Good-cause crowdfunding: this model envisages people pledging money today with the expectation of receiving the first batch of shipped products in the future (a product that, to be clear, it only exists on paper!); Pre-order crowdfunding: a sort of hybrid model between a reward and a donation one, where makers describe their inventions and request seed money from individuals who are basically very excited about what the inventor is building. Inventor-based crowdfunding: There are multiple very well-known platforms which are examples of what described above, such as , , , , , , , , , etc., and I think they will stick around for a while since they try to democratize an asset class that has been historically very selective and not within everyone’s reach. Kickstarter Indiegogo Lendingclub Kiva Seedrs Crowdcube OurCrowd Quirky SeedInvest Token Offering Image Credit: zoommachine/Shutterstock Call it ICO or token issue or whatever you feel like, but the idea is not extremely far from a crowdfunding one. The main difference is that you as an investor receive a token that represents the smallest functional unit of a specific network (or application). , an ICO is a hybrid concept that has elements of a , a campaign, and a with a limited power and application’s domain. As I already said before shares allocation pre-sales/crowdfunding currency In the startup world, there are nowadays so many examples, scandals, theories and problems in the ICOs world that does not make any sense to give you here examples or a up to date (but clearly , , and , within many, have done the history of the field so far). list of the most relevant ones FileCoin Tezos Telegram SingularityNET In venture capital world however, a fascinating concept proposed some years ago was ( ), which in 2016 was also hacked and “unloaded” by about $50M. A new variation of the DAO has been recently postulated and named (DAO + ICO), which basically merges the characteristics of a decentralized venture fund with the ones of an ICO (leaving some sort of voting power to the initial contributors). the DAO Decentralized Autonomous Organization DAICO DAICO original concept: https://ethresear.ch/t/explanation-of-daicos/465 Another recent (and more interesting, at least to me) case is instead the , which tokenized the opportunity to invest in a group of pre-vetted early-stage startups (coming out from the 22nd Batch of 500 Startups). This option gives you (and this is one of the key points of the ICO mechanism itself) not only access to deals but also a certain degree of liquidity (you can sell your token and exit your position). 22xFund Finally, still in the VC sector, and are trying to do somehow similar things, with the first two respectively more oriented toward real estate and luxury asset classes (the first one) and e-commerce, logistic and biotech (the second one), the third one fostering and investing only in the tokenized ecosystem itself, while the latter specialized in AI and targeting anyway accredited investors with the intent though to make VC fundraising faster, easier, more transparent and more liquid. EQUI Capital , JWC Blockchain Ventures , SPiCE VC Asgard VC Syndication Platforms Image Credit: phive/Shutterstock To this class belong software platforms that allow (i.e., investors who are financially sophisticated and with enough means to properly invest) to pool together and invest in a bigger round alongside micro VC, super angels, and other wealthy individuals. accredited investors is the best example of this class, but (focused on the healthcare domain) or are equally valid alternatives. AngelList Gust , AngelMD Propel(x ) Enabling Platforms Image Credit: I’m friday/Shutterstock This is kind of a new concept, which could, in theory, be included in the previous group, but I am intentionally trying to separate them since this concerns different types of . decentralized marketplaces In this cluster, I would include companies and platforms that are not using alternative fundraising themselves but rather creating the foundations for others to leverage non-traditional channels. The best example to explain it is likely , which basically allows the “tokenization of real-world objects”. And by the way, it is a non-profit company, so when they say they do that for increasing trust and transparency in the industry I think it is easier to believe them. Swarm Fund A second alternative is given instead by , which has recently launched a fund backed by other VCs to invest exclusively in decentralized applications built on the Blockstack platform itself (it is slightly more complicated than that, but I am trying to oversimplifying here). This project falls within the group because what they are really trying to do is building a new decentralized version of the internet (but sure, why not revolutionize the investment world in the meantime?) Blockstack Enabling Platforms Conclusion This is not a full list of alternative fundraising mechanisms, but rather a first attempt to map what options both entrepreneurs and investors have. I am not on purpose distinguishing between fundraising for startups and for venture funds because I am more interested in what is conceptually possible and how emerging technologies such as AI and blockchain are changing the industry. In addition to unlocking a new phase for the investment world, those technologies and new business models are democratizing venture funding (from both sides) as never before, as well as solving some major issues the field has ever had. They are indeed i) getting more companies in front of a larger audience; ii) reducing the cost of investing; iii) increasing the market liquidity, and iv) increasing the capital availability (and the possibility to achieve a certain financial goal). However, whether all this democratization will have a positive effect on the industry is still unclear and I would not rush to line up with one side or the other until the long-term implications of those channels will be deeply thought and analyzed.
