Understanding the role of crowdfunding in startup financing

— 2 minutes read




A startup’s journey is anything but linear. It goes through key phases, each requiring different resources, performance metrics… and the right kind of investors.

The Startup Lifecycle: Clearly Defined Stages


Traditionally, a startup progresses through several stages:

  1. Ideation / Pre-seed: validating the problem and solution, forming the founding team, initial product sketches.
  2. Seed stage: building the product, making first sales, validating the business model.
  3. Early stage / Series A: accelerating growth, structuring the commercial side, proving scalability.
  4. Growth / Series B and beyond: geographic or vertical expansion, rapid revenue growth.
  5. Pre-IPO / Exit: business model maturity, profitability or strong traction, exit via acquisition or IPO.
At each stage, the startup must reach specific metrics to convince the next category of investors.

Typical milestones include:

  • Commercial traction (MRR, ARR, CAC/LTV)
  • User retention or growth rate
  • Regulatory or technical validation
  • Team structure and recruitment
  • First market penetration

The Equity Gap: That Critical Moment When Capital Is Missing


Between these stages, there is often an “equity gap”—a period when the startup needs capital to validate key hypotheses but isn’t yet mature enough to attract professional investors (VCs, growth funds).

This gap may appear:

  • Between seed and Series A
  • After some initial revenue, but before solid KPIs
  • When the risk is still considered too high despite a working product
Ironically, this is often when the need for capital is most urgent, to avoid losing momentum or missing a market opportunity.


Why Turn to Crowdfunding at This Stage?


Crowdfunding—especially equity crowdfunding—can play a crucial role in bridging this gap:

  • Retail investors often tolerate higher risk than institutional ones.
  • Amounts raised (typically €50k–€1M) fit the bridge financing needs perfectly.
  • Valuations are still modest, offering high return potential.
  • Public campaigns can also serve as powerful marketing and customer traction tools.

Why So Many Funding Rounds? Each Has Its Purpose
People are often surprised by how many funding rounds startups go through. But this is both logical and healthy.

Each round serves a clear purpose:

  • Pre-seed validates the product
  • Seed validates the market
  • Series A validates scalability
  • Series B+ funds growth
  • And so on

The Role of Early-Stage Investors
Investing early means accepting more uncertainty. But it also means access to opportunities that no institutional fund is touching yet. This is where crowdfunding makes sense: democratizing access to critical stages of entrepreneurial development.

Platforms must therefore help visualize what the startup has already accomplished, what remains to be proven, and how the funds raised will serve as a springboard toward the next level.