VCs vs. Crowdfunders: How They Decide

Ethan Mollick, in a recent Wharton School draft paper, notes that venture capitalists and crowdfunders select the entrepreneurs that they fund in the same basic way: VCs base their selection on “signals of quality” (endorsements from trusted others, the background of the founders and quality of the management team, their past performance and the persuasiveness of the business plan), with biases for geographic proximity and male entrepreneurs. Crowdfunding differs as being more democratic, loosely organized, open and non-controlling. Crowdfunders look for historical success, third party endorsements, a good plan, and a good social network while avoiding the VC biases.

About JeffKoeppel

I am a corporate/securities attorney in the Washington, DC area. Prior to joining the firm, I was a Senior Attorney Advisor in the Division of Corporation Finance at the U.S. Securities and Exchange Commission. I am a member of the Bars of the States of Maryland, New York and the District of Columbia. You can also follow this blog on LinkedIn at:
This entry was posted in Congress, Crowd Fund Act, Crowd Fund Act of 2012, Crowd Funding At the Margins, Crowd Funding Platforms, Funding Portals, Investments, Jobs, Legislative Intent, Small Business, Venture Capital, Wall Street and tagged , , , , , , , , , , , , , , , , , . Bookmark the permalink.

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