Not All Companies Are Worth Funding

It's crucial to acknowledge that not every company merits financial backing. Some ventures are poor investments, raising the question of how they even gained access to crowdfunding platforms. Interestingly, the amount raised often does not reflect the quality of the investment. I've observed numerous subpar companies receiving substantial funding while exceptional ones struggle to gather even minimal amounts.

While theoretically, better companies could attract more investment through effective advertising, this rarely occurs in practice.

The Declining Efficacy of Advertising

Even on major platforms such as Republic, Wefunder, and StartEngine, advertising is losing its potency. Many potential investors are reluctant to receive solicitations via social media, and those interested typically already use these platforms. With the increasing number of companies listed, it has become challenging to research or discover new ventures, making it difficult for those with minimal funding to gain visibility, even through ads.

For instance, a company raising less than $50,000 might be perceived as a poor investment simply due to its lack of investor interest, rather than any inherent flaws in the business itself. Most funds raised actually come from companies promoting their campaigns within their own communities, which poses a significant challenge for promising startups at their early stages.

Exploring Potential Solutions

Realistically, the options for addressing these challenges are limited. In a previous article, I discussed the potential benefits of integrating equity crowdfunding with traditional funding sources like venture capital, accelerators, and angel investors. Such an integration could alleviate some of these issues.

However, portals face a tough balancing act; while they are motivated to host as many fundraising campaigns as possible, this influx can negatively impact individual companies, making fundraising less attractive. Platforms like SeedInvest, which selectively allow companies to raise funds, invest significant resources in vetting candidates but often find limited financial rewards.

Content creators, including myself, have constraints when it comes to assisting companies. Accepting payment for promoting a business requires strict disclosure under the Securities Act, and any content created must be approved by the companies' legal teams to avoid complications. Given the current state of equity crowdfunding, attracting a substantial audience or generating income from third-party sponsors remains challenging.

The Role of Platforms and Content Creators

Companies like KingsCrowd could potentially assist in improving visibility, but a negative rating can adversely affect a business. While I believe their services can be inconsistent, ultimately, only worthy investments should receive funding.

So, where does this leave us? The options are scant. Without effective advertising on platforms like Facebook and Google, and with portals offering limited value, choices are restricted. None of the current content creators possess enough influence to significantly drive investment interest, and traditional funding methods have yet to be fully integrated into most portals.