If you’re closely watching the developing situation aroundcrowdfunding, one of the themes you start to see is that expertise matters – and therefore the whole crusade to provide a platform for funding but little else may need to be reevaluated. Because investors that only provide capital and not industry knowledge and contacts are shortchanging the entrepreneur.
You’ve heard the old saying, “If money is your only hope for success you will never have it.” This is true in the venture capital world as well. I mean, I wish the crowdfunding industry well, but it’s not enough for an entrepreneur to have capital to compete, they need experienced partners with deep expertise, resources and contacts too.
For some reason that adage reminds me of the crowdfunding partnership announced by General Electric ($GE) last week. Because right now, with crowdfunding sites proliferating, corporate involvement has been absent. Yet, while every other company is watching from the sidelines, GE has decided to bring good capital to life by reimagining how it works in the capital markets.
And it’s a game changer.
“What you’re seeing with GE is a foreshadowing of where the world is going,” Jeff Pulver, Co-Founder and Chairman of Zula told me, “and for an entrepreneur to have a resource like GE is a mutually beneficial relationship for both parties.”
I’m not sure angels and venture capitalists understand the significance of this move by GE Ventures. While some of them bring deep expertise and contacts to their investments, most don’t. But even those that have the requisite experience won’t be able to compete with the deep pockets, knowledge and contacts that GE has in the sectors they want to invest. And no one will be better positioned to buy a successful startup – that situation will work for both entrepreneur and GE.
GE’s partner in their new crowd funding venture is with an equity crowdfunding platform called OurCrowd (an Evolve! client, see disclosure below). Scott Kurnitt, an OurCrowd investor, believes GE likes the OurCrowd model because, “We don’t have to hand over our money to a fund and hope they invest it properly. We can decide what to invest in deal by deal.” Kurnitt also likes that OurCrowd provides post investment support to its portfolio companies like making industry introductions, marketing assistance and strong mentorship.
For me, the big question is – where is this new type of partnership headed? Yet I can only speculate that if it works out for GE, big corporates’ doors will be thrown open, and budgets will be withdrawn from bureaucratic R&D departments and given to innovative, early stage entrepreneurs through these types of crowdfunding partnerships.
This kind of situation where big corporate money meets nimble start-up takes advantage of the best of all possible worlds —agile development, innovative culture, and a laser focus on a single objective – combined with the know-how, contacts, and big money of a resource rich company can be a transformative opportunity. You’ve heard of angel investing. I call this “mission investing.”
And the mission of continuous innovation, lost to most companies that reach a certain size, can now be outsourced to entrepreneurs that are better prepared and less encumbered than their corporate counterparts. For entrepreneurs, their mission to create something that changes the world is now easier to realize. Helped out by companies with deep pockets and large rolodexes.
But only the combination of a crowdfunding platform that sources and curates its investment opportunities and a corporate partnership with big financials and resources can make this all possible. Big companies like GE need steady deal flow from a reputable source, and crowdfunding companies like OurCrowd welcome the resources that big corporate can bring to their investments. One without the other isn’t as effective.
It used to be that friends, family and perhaps an angel investor characterized how a startup was funded, but now anyone with a great idea and a talented team can be financed by and partnered with one of the largest companies on the planet. Crowdfunding for early stage companies has become professionalized, able to fund as well as support, serving the entrepreneur and
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