Whether he knew it or not, President Obama created a brand new industry when he signed the JOBS act into law on April 5th. Up until now, it’s been illegal for private businesses to offer equity to anyone other than accredited investors in exchange for funding. As a result, crowdfunding sites (like Kickstarter and IndieGoGo) and the investment seekers that use them have been restricted to giving gimmicky thank you gifts and pre-selling new products in exchange for donations. Although this method of fundraising has proven successful for many artists, charities, and startups, the payback for the people who are giving away their money has been limited to cheap schwag and a few new toys....MORE
The passing of the JOBS Act is about to change all of that. Once the rules are in place early next year, private businesses and startups will be able to use crowdfunding to give equity to investors who will get an actual monetary return instead of a sticker or T-shirt. This shift is expected to attract a huge influx of capital from regular Joes looking for better ways to invest than what is currently being offered by the stock market or the meager 0.5 percent interest from savings accounts.
Fred Wilson, co-founder of the venture capital firm Union Square Ventures (which has invested in Twitter, Tumblr, Foursquare, and Zynga), predicts that once it gets up and running, the equity crowdfunding market will reach $300 billion and will be largely driven by families and individuals investing a small percentage of their assets via crowdfunding. As a point of comparison, a study from Crowdsourcing.org reports that about $1.5 billion was raised from 452 crowdfunding platforms in 2011.
The opportunity to cash in on this new industry by creating “next generation” equity crowdfunding platforms is substantial. Hungry tech entrepreneurs are scrambling to get out in front of this imminent boon; and the market is poised for saturation. To help you keep track of all the happenings in this space, here is a an overview of ten existing platforms that may be getting into the equity game, as well as the status of the newcomers that have been popping up daily.
Kickstarter: With more than 63,000 projects and $250 million in pledges raised, Kickstarter has emerged as a leader in the current crowdfunding craze. There has been a lot of buzz about whether they will start helping their users offer equity to investors once the new rules are in place. But in a recent interview with GigaOm, founder Perry Chan stated that Kickstarter is “not interested in that model.”
Indiegogo: Like Kickstarter, Indigogo is a popular crowdfunding platform that recently raised $15 million in Series A funding. The company claims that this is the largest funding round of any crowdfunding platform to date. Indiegogo was a supporter of the JOBS Act, and founder Slava Rubin told TechCrunch that the company may very well decide to open up the platform to equity transactions in the future.
Fundable: Founded by serial entrepreneur Wil Schroter and just launched in May, Fundable is currently running a rewards-based funding platform while also offering accredited investors the opportunity to invest in small business for equity. Schroter plans to fully open the gates as an equity platform once the new law has been implemented.
Monday, July 16, 2012
JOBS Act: Top 10 Crowdfunding Sources
From Triple Pundit: