Equity Crowdfunding: A Revenue Generating Model Altering The Startup World
From Kickstarter to Indiegogo and Rockethub, early stage startups and small enterprises in the US are presented with a range of investment platforms they can leverage to bankroll new concepts, inventions and ventures. Recent data suggest that on average, Crowdfunding portals have procured nearly $3 billion USD for over a million campaigns in 2012. Trends suggest an 88% increase in global crowdfunding in 2013, relative to 2012 ($5.1 billion vs. $2.7 billion).
To augment these types of funding and deepen entrepreneurship penetration in the US, the Jumpstart Our Business Startups (JOBS) act implemented in September of this year, enable private startups to receive additional revenue via investment crowd funding sites AngelList, Crowdfunder, Somolend and Wefunder and publicly advertise their fundraising via social sites like Twitter, Facebook, and Linkedin. According to Forbes contributor Chance Barnett, prior to the JOBS act, soliciting donations was against the law for startups as fundraising belonged to wealthy companies that already had the capital required to sustain their ventures.
A new and exciting component of the JOBS legislation that could singlehandedly transform the startup and crowd funding communities, is the way early stage firms can now barter for funding. According to the law, private companies seeking investment dollars can offer shares of equity or debt in their company. Within this investment framework, investors who crowd fund become stockholders and possess the potential for financial gains, relative to the in-kind donation structure of traditional crowd funding sites like Kickstarter and Indiegogo.
Coming up with a best-in-class concept and touting it on the right crowd funding channel, particularly one where funders can own a segment of the business, is now today’s reality and could likely revolutionize the startup community and crowdfunding industry.
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