2,612 crowdsourcing and crowdfunding sites
A very powerful two-stage model is emerging in crowdfunding films, one that finally allows fans to participate economically.
The door is wide open for new leaders to emerge in crowdfunding, as the existing ones haven’t learned from the painful lessons of open source and web-oriented startups.
Kevin Lawton, co-author of "The Crowdfunding Revolution: How to Raise Venture Capital Using Social Media" takes a quick peek into his crystal ball in this brief excerpt from the just-released edition of the book.
Author Kevin Lawton suggests two ways for creating a community approach to crowdfunding that are doable right now.
A bittersweet moment in entrepreneurial history recently occurred, with the Senate passage of the JOBS Act. After passing in the House, this 6-pack of small business modernization reforms cleared the Senate. While most things were left intact from the House bill, the crowdfunding component was tweaked to allow for "more investor protections." In my opinion, crowdfunding was the most economically important part of the bill, so it's no surprise that the special interests have dipped their fingers in the mix. Unfortunately, America will pay a price for this in terms of brain-drain. Sound familiar?
Every change in a system encounters resistance, especially those changes which make the most sense. In our new information economy, where value is derived from the richness of our networks and the novel ways in which we find to organize information and connections, a matching capital formation mechanism makes sense. So it is no surprise that crowdfunding, an organic response to service capital needs within our new economy, is growing exponentially. And it's quite anticipated that it should meet resistance.
The resistance to crowdfunding comes in the form of the "fraud bogeyman." Apparently, this phantom stalks only unregistered investments, waiting to emerge from the shadows and steal all of our money. Of course, fear is a potent tool (for better or for worse), and wherever it's sold, one can usually quickly find a lack of real arguments. For example, inherent in a fraudster's ability to steal all of our money via crowdfunding, is someone who invests all of his or her money in one business. And yet, I cannot find a single person who thinks that doing so is a good idea. (If you find such a mythical person, please have them write a blog post about it, and forward me a link!)
The fraud bogeyman has been appearing in a number of places recently, including big media sites and small blogs alike. The number of concurrent mentions of the words 'portfolio' or 'diversification' in the same articles ... ZERO. As usual, fear, uncertainty and doubt are delivered in a vacuum, without any relativity or context. How does anyone lose all of their money on fraud when they're diversified? That's an inconvenient question, of course.
A landmark U.S. congressional hearing relating to crowdfunding and small business capital formation is taking place today, May 10th, 2011! Entrepreneur Sherwood "Woody" Neiss will testify in front of the House Committee on Oversight and Government Reform. Woody is advocating SEC regulatory change which would enable small businesses to solicit funding from the general public. And besides the ear of congress, Whoopi Goldberg has got behind him!
It's no secret that venture capital and angel investing is 'clubby,' dominated mostly by middle-aged men.According to a 2007 study of angel investors in North America, 86 percent were male with an average age of 57. Women didn't fare any better in a similar UK study, where 93 percent of investors were male. A similar trend exists on the entrepreneur side: only eight percent of companies that receive venture capital funding are run by women. While the VC community seems stuck in an old boys network mentality, crowdfunding is radically re-shaping business investment and neutralizing gender bias, for both investors and entrepreneurs.
Crowdfunding is such a pervasive concept that today more than 175 crowdfunding sites exist online. Seemingly, a new crowdfunding site pops up every other day. So it may be surprising to learn that none of them allow entrepreneurs to raise money in exchange for equity in their business. That's because regulatory organizations like the SEC ban it.
"Crowdfunding: go equity or go home"....okay, so this is not to say that various forms of crowdfunding (e.g. 'pledge', lending, revenue-share) are without valid niches. Pledge crowdfunding, for example, can be fantastic for various fan-centric projects. But equity-based crowdfunding is at the center of crowdfunding's future ecosystem for typical high-risk startups.
This is purely a mathematical reality. There are a proliferation of crowdfunding platforms emerging, many with investment models destined for niches at best, and the 'dust bin' at worst. I wanted to give some clarity, as many haven't thought through the macro picture. Again, this is a discussion aimed at early stage 'angel' style investments in risky startups.