Crowdfunding is one of the fastest growing ways to fund your projects. Hundreds of millions of dollars have been raised through crowdfunding in the past 3 years, including over 200 million through Kickstarter in the first 9 months of 2012. There are dozens of different crowdfunding sites around the web, and with the passing of the JOBS Act even more are going to crop up. These resources are designed to help you navigate the complex web of crowdfunding platforms in order to find the most efficient platform for your project. Keep in mind that crowdfunding isn’t just a quick project for you to take part in. It’s a serious endeavor that requires a large amount of forethought put into a marketing campaign before you even start the project on the crowdfunding platform of your choice. The advantage to this is that as you raise money you also help build your reputation and fan base, most of which will be with you for the rest of your business and life. It’s a high reward prospect for raising money with a good chance for success if you work hard on your campaign and keep up with your community as your campaign progresses.
The US Congress recently passed the JOBS Act allowing for non-accredited investors to receive equity for giving start-up money to a company. Previously only accredited investors were allowed to receive equity for giving start-up money. Accredited investors are defined by the U.S. Security and Exchange (SEC regulation) as
- a bank, insurance company, registered investment company, business development company, or small business investment company;
- an employee benefit plan, within the meaning of the Employee Retirement Income Security Act, if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of $5 million;
- a charitable organization, corporation, or partnership with assets exceeding $5 million;
- a director, executive officer, or general partner of the company selling the securities;
- a business in which all the equity owners are accredited investors;
- a natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase, excluding the value of the primary residence of such person;
- a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; or
- a trust with assets in excess of $5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes.
Basically your average person that roams around crowdfunding sites (young males recently out of college) is not likely to be an accredited investor. With the passing of the JOBS Act a whole new way of pre-seed funding is available to companies through the leveraging of their communities. It will democratize the process of providing a start-up with funding to begin their company and give them a head-start on the community marketing as a nice bonus.
List of Top Crowdfunding Sites
Widely known as the largest and most popular crowdfunding site. Kickstarter is almost always the name that people say when asked about crowdfunding. The amount of money raised through Kickstarter exceeds $360m total and has been increasing at an exponential rate; this is in part due to the fact that crowdfunding is extremely popular and Kickstarter has done a very good job of getting their name well known for it.
Audience: Young males out of college, primarily without children
Launched: April 28, 2009
Takes 5% of raised funds, Amazon takes 3-5% (8-10% total)
They started at the Sundance Film Festival working with creatives and have evolved from there. Based heavily on social media and community, they use “gogofactor” to rate projects based on how much you share, update, and communicate with your audience. They provide the most resources to new project creators and provide extremely comprehensive statistics.
Audience: Young women in or out of college, primarily without children
Launched: January 17, 2008
Takes 4% of funds raised on fully funded projects, 9% on non fully-funded projects
Fundable offers both reward-based and equity-based crowdfunding options. They were one of the first crowdfunding platforms to work on equity-based funding after the JOBS Act passed in 2012. It is the top crowdfunding platform for people looking to get investment for companies they want to start.
Audience: Mid-20 to mid-30 males with college education (heavily dominated)
Launched: May 22, 2012
Takes 3.5% of funds raised as well as a certain monthly fee to run your project ($99/month+)
A crowdfunding site made by creatives, for creatives. Its founders are a singer, actor, writer, and musician with a nack for what’s new. The founders testified on the JOBS act which will soon allow companies to give equity to people who participate in crowdfunding campaigns. RocketHub uses social media to give projects close to completion a last shove to full funding.
Audience: Young males in or just out of college
Launched: January 2010