Update on Crowdfunding

I posted an article last fall explaining the new type of Crowdfunding coming as a result of the Jumpstart Our Business Startups (JOBS) Act that became law on April 5, 2012.

I said in that post that I would keep you up to date on the progress of the Securities and Exchange Commission (SEC) as they developed the rules and regulations that would put the Crowdfunding section of the JOBS Act into practice.

Here is what has happened since the passage of this law over a year ago:

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           NOTHING!

 

 

Crowdfunding is still limited to “accredited” investors, or donations, only. Non-accredited investors still cannot invest directly into non-public small businesses. (See my article of Nov. 19,2012 for an explanation of “accredited” investors.)

Interestingly, however, there have been dozens of new crowdfunding sites popping up on the Internet in anticipation of the release of the SEC regulations.

There are far too many of them to list here, so I suggest you connect with this website that maintains a list of current crowdfunding sites. New sites are popping up daily, so be sure to check the list periodically.

Some sites have estimated that there may be around 1,000 crowdfunding sites available by the time the SEC releases their regulations.

Of course, these estimates usually combine all the Peer-to-peer sites, lending sites, equity sites, donation sites, and non-profit sites that are coming online.

Have any of you tried crowdfunding? What was your experience like?

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2 thoughts on “Update on Crowdfunding

  1. We’ve tried crowdfunding on a couple of projects with limited success – possibly due to our limited audience and the scope of our projects, but do know of others who have far exceeded their initial goals with greater success.

    There are two issues with the crowdfunding concept that is currently available: (1) Everybody and their brother is trying to raise money for their passion projects in the creative world (music, art, filmmaking, etc.) so the competition is steep – especially if you don’t already have a massive (and wealthy) audience. If you’re launching an ingenious product, widget or game, then you’ll most likely have greater success. Even some of the craziest concepts/gimmicks can gain a lot of traction. (2) If you need every penny you can raise, regardless of your goal, then chose a crowdfunding provider that gives you a large percentage of what you raise (such as Indiegogo vs Kickstarter) but you’d better have a flexible plan to deliver what you promised regardless of your initial goals or you’ll have pissed-off supporters!

    As you’ve mentioned in many articles before – without a solid marketing/PR plan your chances for success in any kind of crowdfunding or VC funding won’t have a chance of being successful.

    1. Thanks for the comment Jeff—it’s always great to have information from someone who has actual experience. I have looked at several projects, both those that overfunded and those that just couldn’t get traction, and there never seemed to be a regular pattern as to what raised money and what didn’t. I thought there were some really great projects that never funded, and some pretty silly stuff that way overfunded. Maybe if we ever get equity investment capabilities the whole crowdfunding process will change.

      Regardless of what happens, I agree with you that a solid business plan that tells the whole story is absolutely mandatory.

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