CrowdFunding Vs Syndicate Funding-Difference In Investment

Raising capital by the ventures or startups at early stage is tedious task as the information and future projections about the startups at that nascent stage are not clear to the investors. Ultimately, at this stage it is an unproven business model. At that time, getting seed funding and getting funded from the angel investors, could not be achieved by all the startups. As the time forwarded, investment tools (causeartist.com/invest-social-impact-ventures) also changed time to time.

Seed Funding And Early-Stage Funding; Know The Key Difference

In earlier days, getting funded was not easy but now a days new technologies and platforms have given entrepreneurs a plethora of new ways to make funding possible. Nowadays, there are more options than ever to get a new company funded.

CrowdFunding Vs. Syndicate Funding

Syndication and crowdfunding are also the terms that have been used interchangeably since long ago but their concepts and meaning have become increasingly confused. Syndication focuses on funding relationships and structure between the funder and funded whereas crowdfunding is a method of finding investors (or backers) with the cornerstone philosophy of ‘strength in numbers’.

1. CrowdFunding

Crowdfunding is the method of raising money from the crowd by selling or propagating startup’s idea to the masses or crowd via Internet.

Mass advertising of a project or offering outside of one’s immediate personal network is done by the startups or crowdfunding sites. When the idea reaches to more masses, there is probability of getting better crowdfunding.

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The term was first introduced by Michael Sullivan on August 12, 2006, in describing fundavlog: “Many things are important factors, but funding from the ‘crowd’ is the base of which all else depends on and is built on. So, Crowdfunding is an accurate term to help me explain this core element of fundavlog.”

There are many sites available on the Internet who are supporting startups raising crowdfunding. These sites works a deal with the syndication group to be the intermediary in helping startups raise capital.

Crowdfunding is not equity based and it is an easy tool to increase the visibility of the startup as well as raise the capital by attracting investors easily through Crowdfunding platforms.

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2. Syndicate Funding

On the other hand, Syndicate funding or participation funding refer to the type of funding relationship between the funded and its funders, including the relationship between multiple funders. In other terms, syndicate is an investment vehicle that allows investors or backers (a new investor with less experience in investing) to co-invest with relevant and reputable investors or leaders (business angels with vast experience) in the best startups in the market.

Leader chooses a startup to invest in, offers relevant data such as valuation and capital to be raised and specifies the time to close the deal of investment. If backers are interested to invest in the startup then they can invest in by specifying the amount of investment.

Such investment vehicle accelerates by adding more startups, adding more backers and encouraging investors to invest more. All parties involved in this type of funding gets benefited with certain benefits (percentage of profit).

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