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by dagw
4106 days ago
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Why would pre-IPO Facebook take their money? Once they got going they never had any problem raising money from serious traditional institutional investors, so why bother dealing with 50,000 casual investors from the general public? The main companies who stand to really benefit from this are those that cannot raise cash from tradition institutional investor. And companies that cannot raise money from tradition institutional investor don't have the best track record. |
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Two main reasons:
1. Control: Traditional investors want power. Board seats. Founders like Zuck who want to retain control would be able to do it if they funded via the crowd. Right now he has (rare) voting control but if he had funded via the crowd he could have had 100% control. Every single board seat.
2. Leverage: If they wanted VC money for their advice and connections etc -- but they didn't want to give up the aforementioned control, they could use crowdfunding (or the threat of crowdfunding) as leverage. This leverage could also be applied to deal terms like amount raised, valuation etc. Competition is great for negotiations.