Crowdfunding Last Resort

Shaan Puri and Sam Parr share their perspective on crowdfunding, particularly distinguishing between raising from customers versus general crowdfunding platforms. They view most crowdfunding efforts as a last resort for companies that couldn't secure traditional investment.

Key Points:

• Two Types of Crowdfunding:

  • Customer-based: Raising from actual users/customers (like Samuel Adams, Ben & Jerry's)
  • Platform-based: Raising from general retail investors with no connection to product

• Traditional Crowdfunding Platform Issues:

  • Often indicates failure to secure sophisticated investors
  • Usually means companies "struck out" with professional investors
  • Typically involves patching together small checks ($3,000-$5,000)
  • Represents companies that weren't "juicy enough" for professional investors

• Customer Crowdfunding Benefits and Drawbacks:

  • Can create customer loyalty and engagement
  • Makes customers feel like part owners
  • Creates administrative burden:
    • Quarterly reporting requirements
    • Similar to running a public company
    • Distracting amount of investor questions

• Sam's Personal Experience:

  • Regrets doing customer crowdfunding despite success
  • Found managing many small investors burdensome
  • Believes privacy loss isn't worth the benefits
  • Acknowledges it can work well for some companies (like Samuel Adams)

• Professional Investor Dynamics:

  • Good companies often get picked up before formal fundraising
  • Professional investors "circle like hawks" around high-potential companies
  • Going to crowdfunding often signals inability to attract professional money