The Changing Landscape of Early-Stage Financing

Funding options and pathways for early-stage companies are changing – more rapidly now than at any time in the past quarter century.  We’ve detailed many of the changes individually in these newsletters, so it was helpful to find this brief article that encapsulates many of the more interesting shifts into a relatively comprehensive overview.

Much of the activity is happening at both ends of the traditional funding spectrum: the rise of super-angels and accelerators at the earliest stages; and the increased focus of many venture capital firms on late-stage financings — due partly to the diminished opportunities and difficulties in the public markets.

Of particular interest is a development that has been attracting increased legislative attention: crowdfunding through both social networking and other technology tools.  As the WSJ points out, the existing legislation seems fairly inadequate in the modern era, however the risks here are both real and potentially controversial.  Even pros often find investing in early stage companies a challenge, and most entrepreneurs want something more from investors than their ability to click on “like” and “share” buttons.  The debate over crowdfunding will likely continue for some time, and is an area worth watching.