Online VC: A Game-Changer for Early-Stage Startup Funding
With traditional venture capital (VC) funding, individuals or corporations invest in a startup. What about venture capital online funding? What is it, and how can you do it without physical attributes?
Like everything in the modern world, we have taken venture capital online! Online VC poses benefits like global outreach and crowdfunding.
We’ll cover how online VC has worked to become a game-changer for early-stage startups.
Introduction to Online VC and its Importance in Startup Funding
Venture capital is an investment opportunity for people who are looking to increase revenue. This investment opportunity can be made online—this is when it becomes an online VC.
Early-stage startups interested in getting funding from venture capitalists approach people online to pitch their ideas.
The advantage of online VC is that opportunities to invest and ask for funding open up globally. People in the most remote places can pitch to renowned firms without meeting in person.
Online VC platforms encourage more investors to pitch in on one or more startups together. Both investors and startups benefit from an online VC agreement. Let’s learn how this arrangement works.
How Online VC Platforms Operate
Online VC platforms require a unique process compared to traditional VCs. As an investor, you have to start by creating an account and adding credibility.
An online VC platform can be of two kinds: either the platform is made for entrepreneurs to find VC firms or for VC firms to find venture capitalists online.
As a seed startup (early-stage startup interested in funding), you will be vetted by the online platform team. If you are selected, you add explicit and transparent details about your business idea.
To make a VC investment, the investors can browse through the list of hand-picked companies. Once they see a potential seed startup, they can contact them to share equity, expertise or tactics. Venture capitalists can then nurture the startups.
Investors get in touch with the online team to ask them questions. This way, there are no hidden barriers or loopholes in the online process. The platforms will even have their payment software to keep investments clean.
Startups that Benefit the Most from Online VC
You might be wondering who is the target audience for online VC if you can just do it all in person as well. Think about businesses that need to find venture capitalists online because their entire business runs online.
Let’s see some examples to make this more clear.
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Online Platforms and Services
Online services, for example, an online learning platform, might find convenience in online communication. Since there is no physical aspect to the service, investors would prefer online consultation with businesses and vice versa.
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Digital Marketers
Digital marketing, much like its name, is a completely online process. If a digital marketing agency is looking for funding or technical knowledge, they can get on the online VC platform.
Their entire business can be run over the Internet, making it the perfect industry for online VC. Moreover, their online ethics act as a vetting point for investors.
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Influencers
Influencing is another profession performed online. If influencers want to form a joint venture with firms or other influencers, online VC is an excellent place to start. Their new-age marketing knowledge can come in handy for a lot of modern investors.
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Podcasters
Podcasters who want to grow their small businesses might not be the first choice for traditional venture capital investors. However, investors looking for new venture capital online funding opportunities can connect with modern businesses online.
6 Benefits of Online VC for Early-Stage Startups
When you think about it, online VC platforms are a place where different businesses outside traditional norms can get a real chance.
1. Global Outreach
A huge advantage of online VC is that everyone across the world can find each other. If a seed startup is not part of top VC trends in one country, maybe there is high demand for it in another country.
Investors and early-stage startups can collaborate with the help of online VC platforms.
2. Crowdsourcing and Crowdfunding
Crowdsourcing is a way of acquiring funds (or expertise) from multiple people in an online community. Some online VC platforms have crowdsourcing as an investment option for the public.
Startups that are not big enough to qualify as investments prefer crowdfunding for their funding. In fact, the crowdfunding transaction value is set to reach USD 1.20 billion[1] in 2024.
For example, a card game called Exploding Kittens was a crowdfunded project. This means that the creator asked the public for small amounts of funds. This game launched in the market and received further funding.
3. Shared Expenses and Profits
For an online VC, multiple people can share investments in one business project. This reduces the financial risk and burden on one individual.
Online VC projects may start small, so there is not a lot of legal and financial risk that the venture capitalists are put into. They can invest in multiple businesses at once to add to their portfolio.
4. Risk Management
Shared risk management in the venture allows investors to think collaboratively. Multiple perspectives help to predict all kinds of scenarios.
A risk management framework can be drawn up for unique situations regarding an early-stage startup.
5. Faster Communication and Decision Making
An online VC does not need to meet physically for decision-making. The investors and venture can communicate online via video call in a dire situation. Handling contingencies becomes faster with an online mode of communication.
Moreover, the investor can opt to keep the online VC platform involved in the communication process for legal and formal purposes.
6. Low Premiums
Since an online VC platform encourages multiple investors to share resources in one company, their premiums are completely up to them.
They can decide to pay a low minimum for a project and still be part of the investment.
Key Differences Between Traditional VC and Online VC
The main difference between an online VC and a traditional VC is that everything on an online VC is done via the Internet. The investors and startups may not even opt to meet if they want.
All legal work like venture agreements can be done by the online VC platform team. However, in an online VC, the legal frameworks are not as tight as in a traditional VC.
A traditional VC usually has two individuals or organisations investing in an entity. Online VCs can have as many investors as they want since the investment amounts are quite low.
As you can see, there aren’t many major differences between a traditional VC and an online VC. See them both as great investment opportunities for a VC.
Success Stories of Crowdsourced Online VC
There are so many successful companies today that started as bootleg startups. Some of them were even crowdsourced and crowdfunded.
Online VC helped these companies become what they are today through online forums and funds.
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Oculus VR Headset
Oculus was a startup with innovative technology that appealed to the general public online. The augmented reality headset is used to play video games in virtual reality. They managed to raise USD 95 million[2] as VC. After their successful launch, they were acquired by Meta.
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Unilever Foundry Program
Unilever launched a foundry platform—a way to ask the public for innovative strategies and product solutions. This can be considered an online VC project since it led to collaborations and product launches.
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Intel
In an attempt to engage tech ideas worldwide, Intel started a funding campaign. They funded four winning ideas submitted by individuals or startups. This crowdsourcing project encouraged bright minds to come forward.
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BMW
An example of online VC by a corporate investor is BMW’s competition in 2013. BMW crowdsourced ideas to improve their luggage compartments. They successfully received over 700 ideas[3].
To Summarise
Startups have to start somewhere. This somewhere can either be a venture capital firm or an online VC. Online VCs have changed the game for early-stage startups.
They offer solutions like crowdfunding and crowdsourcing that bring ideas from all corners of the world. It is an affordable and convenient opportunity for both investors and startups.
Here at GrowthJockey, our experts offer advice to increase your company revenue. This way, we can help you grow into a startup confident to get venture capital online funding.
FAQs
1. What is a VC online?
A VC is an investment of funds, expertise, marketing, or assets to a small company. A VC online is arranged over online VC platforms. Investors and entrepreneurs both get an opportunity that they would not normally get in traditional VC.
An investor can fund a VC online for an early-stage startup. Or a seed startup can find venture capitalists online for funding.
2. What does VC mean?
VC is the short form given to venture capital. A VC is an investment opportunity for individuals, entrepreneurs, or corporations. A VC investor can either fund a startup or offer their expertise and assets to startups.
VCs can be of different types. Sometimes, more than two investors will come together to form a joint venture to invest in a new entity entirely.
3. Is VC legal in India?
Yes, VC is legal in India. There is a plethora of VC firms and funds in India. Many startups and successful companies in India started because of VC funding. An example of a VC fund in India is Accel India, with 17 startups in its portfolio in 2023 alone.
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