There was talk that the JOBS Act would move small business startups away from venture capitalists and toward crowdsourcing options. It appears it’s not an either/or situation but both/and.
Funding Stats Regarding Small Business Startups
From a survey done by national law firm Dorsey & Whitney (originally done in 2010 and recently updated), we learn that:
- 36% of small business startups in major metropolitan areas did a round of funding (29% prior in 2010)
- 30% of CEOs expect to raise between $1M to $5M (23% prior)
- 15% used business incubators (9% prior)
- CEOs strongly preferred to seek funding from established relationships (i.e. not crowdsourcing)
Another Crowdsourced Option For Small Business Startups
While I mentioned crowdsourced consulting in an earlier post, it seems we have another similar company.
GenCrowd is also provides crowdsourced outsourcing for small business startups. It’s unclear from their website whether they’re familiar with their competitors or what their USP might be over them.
They have a similar story from the previously mentioned AskYourUsers.com.
“The volume of work that startups have to do, atleast initially – from idea brainstorming and validation, brand naming, tagline and slogan generation, logo design, web design and development, content and copywriting, all the way down to website and usability testing, SEO and marketing, analytics research, customer service, and a whole bunch of other issues – can take a real toll on people and businesses alike,” said Barun Rath, founder of GenCrowd.
“Going through the steps, GenCrowd was conceptualized from these issues that we personally faced when starting a business – we were looking for resources to provide us with different ideas and perspectives on different aspects regarding the business we were working on at the time. And so, the idea behind GenCrowd was formed – an online marketplace allowing people to crowdsource ideas, content, and feedback for their business needs.”
GenCrowd seems different in that it allows “blind” listings which means you can solicit feedback without any of the experts being able to see each others’ solutions. Of course it’s hard to beat AYU’s ties with LinkedIn – whatever that benefit might be.
It seems to go without saying that we prefer working with people we know when that’s an option. But to extrapolate that to the conclusion that crowdsourcing isn’t gaining traction does small business startups a disservice. It’s zero sum thinking.
Before, venture capitalists were the main game in town. You may have got funding based on your relationships with them. Of course you had to have a solid idea too. But the relationship needed to be there.
With crowdsourcing, a whole new source of funding is opening up to the market. People without prior VC relationships will now have options where they can prove their idea and expertise.
Small Business Startups Demographics
Of course there’s the debate about preferred startup CEO ages. If anyone does a demographic study on that, I’d like to know. One I saw said the average age of startup CEOs from 1995-2005 was 39 but that older professionals start different kinds of companies than younger ones.
Clearly the older ones are going to be the ones more likely to seek funding and in all likelihood, the younger ones be more inclined to pursue crowdsourcing for small business startups.