While both crowdfunding and venture capital are related to financial matters and have something to do with fundings, these terms are different from one another. Crowdfunding refers to the process by which people, organizations, or businesses raise money. On the other hand, venture capital refers to the private financing of small businesses and enterprises with potential growth invested by wealthy and big companies.
Crowdfunding is like raising funds from those who have the financial capabilities to operate a project or a business but venture capital is the investing of funds by the big companies to support small and starting businesses. In other words, the first one is initiated by the project or business owner while the second one is by the investors capable of financing.
Key Differences between Crowdfunding and Venture Capital
- Crowdfunding is about the way of fundraising from people or organizations while venture capital is the fund invested in businesses with potential.
- Crowdfunding is about inviting people to finance an idea, a project, or a business but venture capital is about financing a starting firm expecting a return of investments.
- Crowdsourcing is actually an alternative to venture capital financing which is a traditional one.
- Venture capital financing is only after the financial returns while crowdfunding is aiming for social impact and changes. Crowdfunding’s goal is more than profit but more than that is to inspire the public to buy or accept a new idea.
- Venture capital requires a more personal approach in having deals to finance a business. However, crowdfunding utilizes online marketing to attract potential financiers.
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