Looks like I have a new example to use in class for legal changes that create new business opportunities. There are several new entities popping up due to the the growing interest in crowdfunding and the passage of the JOBS Act that will allow crowdfunding to be used for equity investments rather than just donations (the Kickstarter model). We are also seeing growth in microfinancing, which is another segment of this industry.
One entry into the wild west of crowdfunding is a Nashville-based company InCrowd Capital, founded by Phil Shmerling. Phil has started writing a blog on crowdfunding that should become a valuable resource for those interested in this budding new industry and those hoping to learn how to become an effective crowdfunder. Phil is a sharp guy who will surely offer all of us useful information through his blog.
Another site was recently launched is called Seeds. Seeds is not taking an equity approach to crowdfunding. Instead, they have established a “game” site that links participants to real entrepreneurs seeking micro loans. They describe Seeds as “Farmville meets Kiva.”
Here is how they describe how Seeds works:
The Seeds revenue model is three-pronged:
1) We monetize impatience. As you rebuild a citadel in the game, you can either wait hours in real time to complete a level, or use virtual currency to expedite the process. Virtual currency can be purchased with real dollars. Proceeds will be microlent to borrowers.
2) The sale of virtual goods: Within the Seeds virtual world, you can purchase limited edition virtual goods using in-game currency to decorate your world. Proceeds will be reinvested in for-profit microloans.
3) Actively asking players to make microloans to the businesses of their choice.
Thus, we’re merging two multi-billion dollar industries – social gaming and microfinance. We’re taking the profits social games make, and reinvesting it in entrepreneurs for a profit, empowering women and buoying economies (including our own!).
While some are beginning to worry that crowdfunding is just one big train wreck, I think that the evolution of the crowdfunding industry is going to be a fascinating combination of a series of little train wrecks and some amazing successful innovations.
Who is going to win? Nobody knows, but the market will begin to give us some insights very soon.
The Wild West of Crowdfunding: Looks like I have a new example to use in class for legal changes that create new… http://t.co/ACqRw1J3
The Wild West of Crowdfunding http://t.co/KONGz1Rs
Equity Crowdfunding sites are busy preparing for the SEC ruling on the JOBS act. One site has an iteresting take on equity crowdfunding, http://www.IPOvillage.com is already open for business. Crowdfunding NASDAQ IPO’s, much like WIT capital, IPO Village gives companies the opportunity to fund their IPO direct to the public utilizing a crowdfunding model.
Dr. C! I’ve been meaning to talk to you about this. A friend of mine works for a company in Germany called “Seedmatch.” (https://www.seedmatch.de/startups) Basically what they do is crowdfunding, except the investors own a stake in the business. It looks a little like Kickstarter (if you go to the site, you’ll see the visuals) but with an actual potential return on an investment, rather than rewards. Is there a model out there like this in the states?
Anne, We will soon see this once the JOBs Act is fully implemented. That was the purpose of that legislation. It is now being sorted out by the SEC to see the rules they establish that govern how this new type of investing in entrepreneurial firms is allowed to actually work in the US.