How Kickstarter Turned Into the Venture Capitalist’s Best Friend

By Joshua Brustein, Oculus VR attracted $91 million in Venture capitalist funding before being bought by Facebook for $2 billion. It turns out that people who are good at raising money through crowdfunding campaigns are also pretty good at raising money from venture capitalists.

Hardware projects that have raised at least $100,000 through Kickstarter or Indiegogo have gone on to raise $321 million from venture capitalists, according to a report published on Monday by research firm CB Insights. About 9 percent of the 443 projects that reach the $100,000 threshold on the crowdfunding platforms have raised venture capital, too.

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When crowdfunding took off, some people believed the idea could pose a threat to venture capital as the prevailing way for technology startups to raise money. Predictably, professional investors quickly found a way to co-opt the trend. Venture capitalists are smart enough to browse the projects on Kickstarter and conclude that the really popular ideas might turn out to be good businesses. “We consider that an extremely helpful data point about whether the public wants a device,” says Peter Moran, a partner at venture firm DCM. The firm hasn’t made any investments in post-Kickstarter investments, but Moran says his colleagues are increasingly attuned to crowdfunding platforms.
Read More on http://www.businessweek.com/articles/2014-08-11/kickstarter-successes-pivot-from-crowdfunding-to-venture-capital

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