Crowdfunding 2.0: A New Means for Capitalist Participation

The JOBS Act has opened the floodgates for small-time investors. Now there just needs to be a comprehensive platform that attends to this area. Such a tool could maintain momentum for the entrepreneurial renaissance occurring around us.
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Entrepreneurs must spend extensive time raising funds. There is no way around it. From constant networking to attending conferences and landing clients, there isn't much time left to spend hunting investors. Crowdfunding platforms luckily reduce the pain of emerging businesses in need of capital.

Kickstarter and Indiegogo are synonymous with the popular rise of crowdfunding. Pebble Watch, an early-mover in the smartwatch space, raised a whopping $10 million. Although an outlier, Pebble is a primary exhibit for what the crowd could do for emerging companies.

Crowdfunding was further legitimized by the JOBS Act, which removed restrictions on small-time investors from funding a business. While the trend has granted significant opportunity for companies just starting out, there is a lack of crowdfunding options for those with traction needing a momentum boost.

Due to the change in policy a gap now exists in the crowdfunding space. It will take an understanding of the complex, real-world processes that provide integrity and confidence for investors to create a digital experience that drives capitalism.

Crowdfunding Those With Traction to Reach the Next Level

Whether it be a disruptive electronics product in the vein of Pebble, a contentious mayoral campaign seeking wider support, or a medical device manufacturer with a fully-functional prototype, crowdfunding has room to mature to attract such ventures.

For ventures under $500,000, Kickstarter is an effective solution. For drug companies creating the next groundbreaking cancer drug, VCs and angels are the route to millions. Yet there are no widely heralded crowdfunding platforms for companies who are out of the startup phase, but still in need of a cash infusion.

As CEO of software development firm Icreon Tech, I know full well that the technical capabilities and web development processes necessary to create such a platform already exist. But the platform that fills this void will need to bridge analogue investment processes with an intuitive software platform built for today's tech-savvy user.

Bridge Analogue and Digital for a New Investing Experience

IndieGogo donors are only reimbursed via offers or perks. The same goes for Kickstarter. While such a model works well for smaller projects and minimal contributions, it does not scale or provide enough incentive for larger projects. Such sites are essentially crowdsourced donor platforms with rewards, not returns.

In order to attract true investors there needs to be more to offer in terms of return. As a result of the change in regulatory policy, crowdfunding donors will now be eligible for equity and return on their investment.

Incorporation of features such as webinars or one-on-one discussion between founders and potential investors could help attract the ideal audience. With Google Hangouts and other technology this is a highly practical tactic to implement.

Clear designation of contractual agreements and investment brokerage will also be needed to add credence to such projects. Even the incorporation of account managers to provide support and communication could help garner serious interest.

With this drastic change in regulation there could be a new ecosystem of capitalist participation in the United States. But it will require a mix of digital and analog components which make crowdfunding investments secure, trustworthy and reliable.

Web Facilitated Brokerage and Contractual Processes

As an industry, crowdfunding is set to bring in $5.1 billion in donations and contributions this year. Yet the median raised per campaign is less than $5,000 according to Reuters. Integrity and security will be critical for any platform hoping to attract investors to larger projects.

Secure payment portals and gateways for eCommerce sites and services such as Paypal will not be enough. If possible the platform could facilitate secure wire transfers without the investor having to physically visit a bank. Transactions are crucial. But the personable relations between investors and emerging businesses is equally vital.

If contributing to a political action or lobbying group, tools to facilitate stakeholder relations will be crucial. Whether it be a political campaign or a medical device prototype, stakeholders require their opinion to be heard. Enabling a more seamless interaction with stakeholders can increase the likelihood of success for such a platform. Pebble hired a full-time staffer to correspond with the 69,000 contributors. The same approach would be needed for handling contractual agreements and brokerage costs.

In 2012, over half a million businesses were founded each month in the U.S. With proper logistics and a defined vision, a crowdfunding platform could increase that metric by leaps and bounds. The JOBS Act has opened the floodgates for small-time investors. Now there just needs to be a comprehensive platform that attends to this area. Such a tool could maintain momentum for the entrepreneurial renaissance occurring around us.

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