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What they mean
Crowdfunding is when you raise money on a platform from generally unsophisticated people. It is done as an alternative to raising from VCs, but can be done together too.
This is only really relevant for hardware startups, and in some cases, consumer-focused startups since challenger banks in the UK have used them to good effect.
My friend is doing a consumer fintech startup told me she did a crowd raise alongside an angel raise as the ‘investors’ are also ‘customers’, so it’s a really effective means to acquire customers at a low CAC. Think of it as a marketing hack. Monzo did two crowd raises.
Doing a kickstarted is pretty 101 for a hardware startup. Haxcellerator’s accelerator prepares startups for a crowd raise not a demo day. I would really think about a kickstarter if you are just starting a HARDware startup. Just be aware they are not cheap. The average successful crowdraise blows $100k!
It can also be a stupid question on behalf of investors, or they think you haven’t validated your model and need to do so via the crowd. They could advise to do a crowdfunding round if you are really early stage, and then come back to them.
It’s typically always a bad idea to call investors stupid. Unless your name is Mark and you were goaded to go into the meeting in your dressing gown to tell them to screw themselves (True story!). Then adding they are stupid, poo-poo pants is pretty fine. I jest.
What you need to say
“We don’t seek crowdfunding as being terribly applicable to us. We know some consumer businesses have got a great acquisition cost of customers from there, but we just don’t see any demographic crossover. We thought about it, but it is not something we would proceed with. Do you have views we might not have thought of?”
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