The Symbiotic Relationship Between Venture Capital and Crowdfunding

Todd Crosland venture capitalIf you’ve followed the exciting life of Kickstarter projects like the Pebble E-Paper Smartwatch or the Coolest Cooler, you might think traditional financing is a thing of the past. After all, these projects both raised more than $10 million through Kickstarter’s crowdfunding model with the help of thousands of backers.

Wildly successful campaigns like these are the exception on Kickstarter, where most projects only just reach their modest monetary goal or get completely ignored and buried in the process. Rather than making venture capital irrelevant, this survival-of-the-fittest trend in the crowdfunding model has actually provided a way for venture capitalists to test the potential viability of a product before going all in.

Crowdfunding can be useful even when a company is particularly well-funded. Where else can you find an audience so excited to get the latest and best gadgets that they are happy to help fund your product’s development? Where else can you actually pitch your product idea to your intended audience rather than a CEO of a large corporation?

The symbiotic relationship is not just about safeguarding a venture capitalist’s wallet. It can also help investors find the right kinds of products to fund. According to CB Insights, about 10% of all crowdfunded projects that pass the $100,000 mark get formal venture capital funding after the campaign’s end. And as of mid-2014, more than $300 million has already been committed to these companies, with lots more projected by year’s end.

Products that cannot be explained through a 5 minute Kickstarter video will likely remain solely in the world of venture capitalist funding, at least for now. But for those products that can benefit from both venture capitalists and crowdfunding models, crowdfunding will continue to be a solid source of validation for investors looking to write a check.

Venture Capital in the Real Estate Industry

Todd Crosland Venture Capital Real EstateThe real estate industry has changed a lot in recent years due to the rise in technology. The most notable change is the increase in online real estate search websites such as Zillow, Trulia, Realtor, etc. These websites have made it easier for buyers to search for homes and easily connect with the seller. What hasn’t changed much in the industry are the procedures for buying and selling a home.

Venture capitalists are seeing this as an opportunity that they can take advantage of. By backing companies that use data analytics to streamline the home buying process, there could be a lot of upside here. In the first three quarters of 2014, venture capital firms injected $118.5 million into eleven real estate startup companies. $64.8 million was put into six real estate startups in the 3rd quarter, which was the largest VC injection into real estate since 2000.

One of the more notable deals was split between the venture capital firms, Crest Capital Ventures, Intel Capital, and Claremont Creek Ventures. These three VC firms helped raise $12 million for SmartZip Analytics Inc., a data analytics provider to real estate companies. The data specifically uses predictive measures to match real estate agents with homeowners that are on the cusp of selling their homes.

Another company, Agent Ace Inc., uses data analytics to match homebuyers and sellers with the best realtor for their specific home buying needs. They recently closed their Series A round with a $6 million investment round.

Buying a home is debatably the most important investments that someone makes in their lifetime. By streamlining the process through data analytics, consumers should be able to feel more comfortable when purchasing a home.