Crowdfunding or Business Angels to Finance Start-Ups

Abstract

Nowadays, many start-up companies struggle to raise external financing, partly due to the global economic turmoil. However, the main reason is that, after entrepreneurs have utilized their personal savings, but cannot for one reason or the other secure a bank loan or attract venture capitalists, an equity gap exists, which currently only hard-to-acquire business angels could fill. Recently, a new phenomenon presented itself, namely crowdfunding, in particular equity crowdfunding. Many experts in the industry believe that it has the potential to compete effectively with its larger counterpart. Therefore, an extensive research was conducted in order to find out whether this fundraising option could more beneficial to start-ups.

At first, both forms where compared to one another on basis of various important aspects. The most useful angel networks and crowdfunding platforms were analysed thoroughly and, additionally, many valuable suggestions are given to early-stage entrepreneurs. Most angel financing –related information was gathered from a broad collection of existing literature. On the other hand, the crowdfunding market does not provide an abundance of material and therefore three of the largest patriarchs of the Finnish crowd-based funding scene were interviewed and asked for their opinion on the matter.

Even though this question doesn’t have a right answer, because many factors should be taken into account, an interesting conclusion was drawn based on the collected information and the writer’s own point of view.