This form of fundraising has three advantages.
1. The first advantage is that you can theoretically raise more money by venture crowdfunding and reach out to millions and billions of individuals, all of whom are potential clients, rather than a limited group of banks and funds. By default, your clients in total have more money than large investors. To see the difference just think about the fact that you bring profit to your large investors because you earn money from your customers, and that revenue is significantly higher than the amount you need to repay.
2. The second advantage is the previously stated bargaining power. It’s a problem if a large million-dollar investor refuses to invest in your business. However, if a small individual investor declines to send you fifty dollars, let them go; sums like this can be substituted by other people very easily. As a result, there is no one else but you dictating the terms of the investment, so you can get higher interest rates or better equity stake that you are giving away, which is a significant advantage to you.
3. The third benefit, which is the most powerful, is getting a community of hundreds and thousands of people supporting what you’re doing. Banks are never truly interested in growing your business, funds may help this process from time to time, but their goals and principles may drastically differ from yours. Having a big circle of like-minded people will help to run community oriented business
by growing your brand, providing services, building connections, or even getting new clients. This is similar to having thousands of advisers and part-time employees nurturing your business, which is an invaluable asset one can never get from banks and venture capital funds.