It's Every Entrepreneur's Responsibility to Invest in Other Startups Four reasons why crowdfunding others' projects helps you too.
By Sohin Shah Edited by Dan Bova
Opinions expressed by Entrepreneur contributors are their own.
Crowdfunding has proven to be a revolutionary form of startup financing; and as a young entrepreneur, I can personally attest that it changed my life.
Related: Why Venture Capitalists Are Turning to Crowdfunding
After all, it was through the contributions of generous crowdfunders that I was able to launch my first product, Valuation App, despite my lack of capital or a successful track record. Without those contributions, my entrepreneurial aspirations probably would have remained a distant dream.
But after discovering the power of crowdfunding for Valuation App, I wasn't done: I then brought this revolutionary form of financing to the real estate industry: In 2012, I launched iFunding, a real-estate crowdfunding platform which aims to make real-estate investing easier, more transparent and more seamless for accredited investors.
That concept can certainly be applied to other industries. So, are you in? By taking the plunge as an investor, you can help usher in a new era of startup success.
How crowdfunding is disrupting entrepreneurship
Crowdfunding allows entrepreneurs at all levels to attain financing and invest in new ideas. It also allows up-and-coming entrepreneurs from any industry to pitch ideas to investors worldwide without the hassle of traveling or navigating stringent SEC rules.
And those investors can get involved in more startups by contributing lower amounts. With lower minimums, accredited individuals previously restricted by cash flow can now spread their cash among multiple startups.
My success with my two forays into this new means of financing proves how essential crowdfunding is in developing and supporting budding entrepreneurs. Dreaming up new and innovative ideas is every entrepreneur's bread and butter, but supporting great ideas is every entrepreneur's privilege.
Here are a few reasons why successful entrepreneurs should consider investing in new ideas via crowdfunding:
1. An opportunity to pay it forward.
No entrepreneur has succeeded without a little help along the way. You have a responsibility to support other entrepreneurs in the form of donations or equity investments to champion the growth of new ideas.
I never would have been able to launch Valuation App if I hadn't had 57 backers helping to crowdfund my idea. Those people invested for zero equity, and most were entrepreneurs who understood and believed in the vision I was trying to share. For this reason, I consistently back great ideas through crowdfunding.
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2. A contribution to job growth.
In supporting new startups, you're fueling job creation by helping startup leaders to bring on more talent. Whether you choose to fund a startup during its first round, to help build momentum, or during subsequent rounds to build out its team, you're contributing to the development of new jobs either instantly or in the future.
3. The opportunity to grow your own network.
Other entrepreneurs are the most valuable assets you can have in a network. By connecting with idea supporters and dreamers, you gain access to people who can help support your entrepreneurial endeavors, and vice versa.
4. The connection to investors.
Initially, my product had little traction or proof of concept, and our investors understood the level of risk they were signing up for. But their hesitation led to passionate conversations that helped me peel back their concerns. Now, as an investor myself, I can better understand their insecurities, questions and expectations. These are insights you can learn only by taking off the entrepreneur hat and putting on the investor one.
If you're in a position to start investing, go for it. Websites such as AngelList, Wefunder and Crowdfunder connect accredited investors with emerging startups that need financial backing and make it easy to find a potential fit.
By becoming an angel investor and championing new startups, I've not only expanded my portfolio but also learned valuable business lessons from the young entrepreneurs I have the privilege to work with. Helping new startups get off the ground provides a sense of fulfillment that no dollar amount can quantify.
Don't wait to pay it forward. Who knows -- your dollars might fund the next overnight success story.
Related: Crowdfunding or a Small-Business Loan: What's Best for Your Company?
