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Crowdfunding currently takes two main forms: donation and pre-selling

This approach has been very successful for technology startups such as Pebble Technology which raised a record breaking 10.3 million dollars through Kickstarter.

Anyone can already start a Crowdtilt group with a funding goal. Now they can select a 501(c)(3) organization from Crowdtilt’s index to receive that money. If the campaign “tilts” — a.k.a. reaches its goal — that money goes directly to the nonprofit, minus Crowdtilt’s regular 2.5 percent fee.

For Kickstarter, unrefined and/or overpromised goods are a real problem. Not so long ago, amidst a wave of bad press from outlets like NPR, Kickstarter enacted some new policies to remind “backers” that this was an investment (risk-oriented) site, and that products may differ from sales pitches. Product renders and simulations were banned, since anyone can draw a flying car. And a risks section was added to each listing, requiring project leads to explain problems that could arise in producing their good. These changes certainly protect consumers--err, investors--but I’m not sure they solve the larger problem: Is Kickstarter a venue that encourages good designs to become great ones, or great designs to be scaled into incredible manufactured products?

There are now scores of startups offering to connect people and their product ideas with funding sources and potential customers. Is this gold rush an ominous sign? Will crowdfunding be the next daily deals bubble? Probably not. Crowdfunding works through interested investors or enthusiastic supporters, which seems more sustainable than merchants providing steep discounts to get customers in the door.

Kickstarter is being sued for promoting a new 3D printer due to patent infringement after drumming up more than 2,000 supporters. The 3D printer in question has already helped to raise Formlabs over $2.9 million to build the device.

3D systems has filed a lawsuit against both Formlabs and Kickstarter for patent infringement. Formlabs is the manufacturer of a low-cost 3D printer called the Form 1.

The Kickstarter fundraising campaign topped $1.4 million in pre-orders in just under a week, making it one of the notable successes of the platform. Formlabs ultimately raised $2,945,885. Kickstarter is financially involved as it takes a 5 percent cut on each campaign, according to the BBC.

crowdfunders seem to understand the high risk of putting money into a new idea, the survey shows. They're well aware that most small businesses fail. As a result, they spread their investments. Moreover, many take due-diligence seriously, and they limit their investments to amounts they can afford to lose.

all of sudden he has shown up with a IndieGoGo campaign to crowdfund his design!

Emmanuel Gilloz, the creator of the Foldarap 3d printer has launched a crowdfunding project on Ulule. The FoldaRap is an open-source 3D-Printer, a foldable RepRap.

Everyone has an opinion on the crowdfunding industry these days: it’s the new thing; it’s over; it’s just getting started, it’s overheated; it’s the future of finance, it’s fundamentally flawed.

there may be some significant risks for investors.

when a technology business ends up on a crowdfunding platform for growth capital, an investor might safely assume that the so-called smart money in Silicon Valley (or elsewhere) have already learned of and passed on the opportunity.

Veloso has a bunch of contributor incentives for his campaign, for example someone who donates $159 will get a disc in the mail with all of the plans to build one of his printers, for about $3,999 a contributor will get a complete kit with all parts needed and 1 Kg of the UV resin! The price might be a bit steep but after you see the kind of detail that this printer can achieve you may find yourself seriously considering it.

Needless to say, individual investors, most of whom are investing as little as $1,000, simply can’t muster anything close to those resources. It makes sense, then, for crowdfunding investors to focus on companies and industries that are more accessible, easier to understand, and on which they can realistically perform due diligence themselves.

Aside from direct patent infringement, 3D Systems claims that the crowd-funding campaign has caused “immediate and irreparable injury and damage to 3D Systems” by promoting the new printer.

Of course not. So why would you invest in securities on a site that is run by a management team that had no experience in investing and no demonstrated knowledge of the securities business? Common sense will help lead investors to screen crowdfunding portals for those that have an established background

enture capitalists and angel investors spend weeks or months negotiating the terms and the structure of a new investment. Crowdfunding investors frankly can’t. Instead, they are typically forced to accept one-size-fits-all terms proposed by the company’s founders or a lead investor.

two-thirds of investors surveyed expressed the need to feel some emotional connection with a target company.

They should engage customers and other potential funders through social media and present a human face.

A wise company will stress the risks to avoid a backlash on the same networks that it used to raise cash.

you might not have to give up as much control to the crowd as you would to an experienced investor.

the social and marketing benefits of the company's crowdfunding campaign have been impressive:

Fiction Kitchen used Kickstarter, a crowd-funding website, to raise $37,423 for new kitchen equipment, including an exhaust hood and range that have never come in contact with meat.The restaurant’s campaign, which kicked off Sept. 6, attracted 590 backers and surpassed the owners’ $36,000 goal by their Oct. 13 deadline.“Not only is it a way to raise money, but it’s also a way for me and Siobhan to gauge whether this is a viable thing,” Morrison said.

The company's new small shareholders get discounts on the company's products, and they can gather in a private forum to chat. This is more than a straightforward financial holding. Like social media itself, it's all about community.

Yes the Project Eternity Kickstarter ended with record breaking numbers a while ago, but PayPal donations stayed open. Yesterday marked the end-proper of crowd-funding, and the new grand total stands at $4.3 million, Obsidian announced. That total can still budge slightly via a solo Slacker Backer tier left open on the Obsidian site - $29 for game code, basically. There's also the option to simply donate money for nothing in return. There have been a few updates worthy of note since the Kickstarter drive ended.

If job creation through crowdfunding is going to be effective, and credible, there needs to be data and tracking behind it, which will in turn help guide all those involved in creating access to capital towards more effective jobs creation.

Crowdfund Investing is a great example of this in action, as provided for by key sections within the JOBS Act.

As a result, I believe small business investment through crowdfunding will prove to be a game-changing “bottom-up” approach to economic development using Finance. Jobs will follow as quality businesses are funded and this new capital market grows. We’re just waiting on the S.E.C. to finalize their Rulings, which have been delayed, but will roll out in two phases throughout 2013: first empowering accredited investors, then later in the year, non-accrediteds.

Crowdfunding is exactly the kind of bottom-up “help us help ourselves” solution that government should be doing more of to help small businesses.

. Both government and private leadership see that growth in the funding of small businesses is a critical corner piece in the jigsaw puzzle of economic growth, and thus jobs. But why do we think small businesses are so important?

MicroVentures is an online peer-to-peer investment marketplace. It helps accredited investors pool their cash together and get access to startup funding opportunities that aren't usually available outside of the traditional venture capital network.

Indiegogo is part of the old guard in the crowdfunding space, at the ripe old age of four. The company says it's "the world's largest global funding platform."

Mike Norman says he created Boston-based WeFunder "specifically to respond to the new opportunities the JOBS Act provides."

Each investor is limited to investing an amount equal to the lesser of (i) $10,000 or (ii) 10% of his or her annual income.

The issuer or the intermediary, if applicable, must take a number of steps to limit the risk to investors, including (i) warning them of the speculative nature of the investment and the limitations on resale, (ii) requiring them to answer questions demonstrating their understanding of the risks, and (iii) providing notice to the SEC of the offering, including certain prescribed information.

startups must understand that minority stockholders have certain significant rights under state law, including voting rights, the right to inspect the company’s books and records, the right to bring a derivative claim on behalf of the company, and certain protections against oppression by the controlling stockholders.

startups will likely have difficulty raising funds from VCs and other sophisticated investors if they have hundreds of unsophisticated stockholders. Needless to say, few sophisticated investors will want to sit on the board of directors of such a company due to the risks of lawsuits relating to director liability; and I would assume D&O liability insurance rates will sky-rocket for these companies.

regulators are still working on ways to ensure investors are educated on how to evaluate crowdfunding proposals, and how to monitor the amount of money investors are pouring into companies through online portals (the law places a tiered cap on crowdfunding investments based on an investor’s income).There is also a great deal of uncertainly concerning the standards for “registered funding platforms.”

Jumpstart Our Business Startups Act

The JOBS Act also requires the Financial Industry Regulatory Authority, a nongovernmental organization that regulates brokerage firms and exchange markets, to implement a new set of rules specifically for crowdfunding portals.One big problem: The law set no deadline for FINRA, which according to Tim Rowe, chief executive and founder of the Cambridge Innovation Center in Cambridge, Mass., often “moves at a snail’s pace.”

That could mean an additional year or so after the SEC publishes its own rules before crowdfunding is available to entrepreneurs. “We’re ready for a good long wait,” Rowe said.

News of a leadership change at the Securities and Exchange Commission has some experts concerned that entrepreneurs may have to wait even longer for highly anticipated yet already delayed crowdfunding rules.

Mack said this latest development may leave entrepreneurs waiting “several months, or perhaps a full year, or perhaps longer” for the SEC crowdfunding rules

n the event the company is raising over $500,000 it will need their financial statements to be audited, which could be a costly process. Funding portals will also be “invited” to pass certain requirements. Some of these might be registration fees or for the portal management team to hold whatever exam FINRA or other SRO may require.

Data from massolution research indicates that total funds via the reward and donation based crowdfunding are growing at a rate of 524 percent, where platforms raised almost $1.5 billion, funding over one million projects in 2011.

a crowdfund industry consultancy firm will be releasing a report in September 2013 that shows the debt and equity crowdfunding space to be at least $4.3 billion in its first year of operation.

While crowdfunding lets businesses test the popularity of their product, it also gives copycats the opportunity to launch a similar business and rush it to market.

The idea of “its not what you do, but why you do it,” really hits home here. By focusing on a bigger purpose, the driving force behind a brand, project creators will be able to create a unique community of likeminded individuals.

Typically, most successful projects receive about 25-40% of their revenue from their first, second and third degree of connections. This could include friends, family, work acquaintances, or anyone that the owner is connected to, including their second and third degree connections. Once a project has seen some traction, unrelated consumers start coming out of the woodwork to support campaigns they believe in.

Utilizing social media, creating email distribution lists before the project launches, contacting local media, are all necessary steps to take if you are serious about your goal.

There are three main reasons why people unconnected to a project or business would support it:

1. They connect to the greater purpose of the campaign 2. They connect to a physical aspect of the campaign like the rewards 3. They connect to the creative display of the campaign’s presentation

In this age of the digital reign, many consumers will stop reading your campaign if they don’t connect to the video, so this is really the gateway to your proposal

While crowdfunding creates a funding opportunity that certain smaller businesses may not have received in the traditional way, it also is a great outlet for more established companies.

the pilot program would provide FINRA with necessary data for their own regulatory programs. I will go so far as to say that RocketHub believes that without this testing, the SEC runs the risk of writing out an inefficient and potentially ineffective regulatory framework.” “We strongly believe that a pilot program will allow both the SEC and FINRA to identify topics that require additional regulation before the floodgates open

“In honesty, and in the spirit of being pragmatic, I believe the risk of loss due to under performance of a legitimate start-up or small business far outweighs the likelihood of loss to investors due to fraud or omission.”

Mr. Jackman and Mr. Symington turned to U.K. crowdfunding website Crowdcube.com and raised £600,000 in 16 days for their career-change website in exchange for a 24% stake of their business. Around 400 people invested between £200 and £20,000 each, in return for non-voting shares in the company–and a branded hoodie or t-shirt.

If the SEC and the industry fail to keep the rip-off artists out, crowdfunding could become toxic to both investors and businesses. Even without deliberate fraud, big losses for people who don’t fully grasp the risks involved might have the same effect.

Crowdfunding is on ice until the SEC finalizes the regulations, even if that takes more time than the law allows for.

Washington State Securities Administrator, says advertising unregistered investment opportunities used to be a red flag for a scam. With the advertising ban repealed, he asks, “how are we to detect the legitimate from the illegitimate offerings?”

It doesn’t say what kind of background check is necessary or what kind of past problems should get someone barred.

“funding portals.” While lots of new companies want to play this role, questions about how they can operate remain: How will they vet companies raising money? How will they make sure investors understand the risks? How will they make money?

Lots of questions remain unanswered.

These existing companies are ‘startup social networks,’ networks that, among other things, connect startups with investors. With existing deal-flow (companies) and capital (investors), the market is already made, and offering a crowdfunding solution is a natural decision.

Among the severe cuts, organizations like the First Nation's Governance Institute have been put on notice that their funding will be cut completely within a year. Motivated by the goal of self-reliance and self-governance, combined with the added squeeze from budget cuts, FundWeaver wants to build online collective support systems for financing Aboriginal organizations, entrepreneurs and community members.

the North American Securities Administrators Association (NASAA), a trade group for state regulators, has been lobbying very hard against the House Bill to prevent the preemption of State law and to reduce the maximum investment amount per investor.

For example, as a recent Wall Street Journal article pointed out, the crowdfunding site ProFounder “drew scrutiny from California securities regulators and was recently forced to abandon its original mission of providing online sales of equity stakes in small businesses.”

Any companies that raised funds via Profounder now run the risk of having violated applicable federal and state securities laws by utilizing an unregistered broker-dealer.

This transformation in values that is taking place is simultaneous with, and in part the result of, the rapid evolution of the technological infrastructure that is substantially increasing connectivity and communication across the world.

ooperation and collaboration will replace the ethic of self-interest that has been reinforced by capitalism and the ‘economic lens’ that institutionalizes greed and avarice. Living isolated, insularly focused lives will be replaced by more connected and holistic ways of being in the world. Corporations, the dominant legal structure of the last several centuries will, in time, be replaced by legal entities that are aligned with a broader mission than simply the maximization of financial profit. We will see the birth and the boon of the social finance sector

TribeSourcing, a term coined by Mark Frazier, is the most important feature of new platforms, one that borrows from the principles of mass collaboration which matches the platform to the group, community or movement within which it is situated. Currently crowdsourcing platforms are designed to enable a single entrepreneur to simply solicit funds from her network, but the relationship between her contacts is not a consideration

Crowdfunding is coming of age and we can expect a proliferation of innovative platforms and models that will be more collaborative and engage communities around projects in a deeper and more powerful way.

"The potential for fraud in this area is real and potentially enormous," Jack Herstein, president of the North American Securities Administrators Association,

people sometimes offer “perks” in exchange for contributions. To our knowledge, none of these offerings has been subjected to scrutiny by securities regulators to date, but it is possible that even the offering of a perk in exchange for a donation could convert these offerings into securities in the eyes of some state governments.

There are two crowdfunding web sites that have spent tens of millions of dollars in legal fees so that they can offer crowdfunding opportunities that are compliant with state and federal securities laws. These are Prosper and Lending Club.

A proposed bill, HR 2930 (McHenry), would exempt offerings of up to $5 million with a maximum of $10,000 or ten percent of net worth per investor and would exempt such offerings from state-level registration requirements. Meanwhile, President Obama recently proposed a similar exemption.

four common reward types

Copies of the thing

Creative collaborations

Creative experiences

Creative mementos

To date the most popular pledge amount is $25 and the average pledge is around $70.

Because funding is all-or-nothing, you can always raise more than your goal but never less.

Projects must set a funding goal and a length of time to reach it. There’s no magic formula to determining the right goal or duration.

Funding comes from a variety of sources — your audience, your friends and family, your broader social networks, and, if your project does well, strangers from around the web.

Actual value considers more than just sticker price.

Projects can last anywhere from one to 60 days, however a longer project duration is not necessarily better. Statistically, projects lasting 30 days or less have our highest success rates

making a video is a challenge worth taking on. It says you care enough about what you’re doing to put yourself out there. It's a small risk with a big reward.

videos must be 1000MB or less and have a file type of MOV, MPEG, AVI, MP4, 3GP, WMV, or FLV.

for most projects, support comes from within their own networks and their networks’ networks.

A nice, personal message is the most effective way to let someone know about your project. Send an email to your close friends and family so they can be first to pledge, then use your personal blog, your Facebook page, and your Twitter account to tune in everyone who’s paying attention.

Don’t be afraid to take your Kickstarter project out into the real world

Project updates serve as your project’s blog. They’re a great way to share your progress, post media, and thank your backers.

treat your project like a story that is unfolding and update everyone on its progress

don’t forget about all the people that helped make it possible. Let backers and spectators watch your project come to life by sharing the decisions you make with them,

The story of your project doesn’t end after it gets shipped out. You still have a captivated audience that’s cheering for you.

Remember to take shipping costs into account before you start your project.

Opening the funding process to the general public adds transparency and trust signaling. It's much harder for fraud to occur when the whole world is watching, especially with credibility and performance ratings. Raising money nearly always requires using a first-level network as a trust signal to drive the network effect. No trust circle equals no funding.

The model that Crowdcube operates requires that, as an investor, your register with the site and deposit an amount of money into a Crowdcube account. Once done, you can review the offers and bid on the portfolio of projects on the site.

e arguments for the regulation are primarily founded in the notion of risk mitigation and fraud prevention.

Minimum amount to be raised is currently £5,000, and there is no maximum, although Crowdcube suggest £150,000 as a typical maximum.

Minimum investment is £10, and transaction costs for companies raising money are relatively limited by comparison to a traditional equity sale process. Set legal costs are passed on to the entrepereneur, and Crowdcube takes a fee.

An alternative model is used by Symbid in the Netherlands, where they use a cooperative vehicle as the collecting mechanism for the investment- so pooling the individual contributions into a sole legal entity that invests in the entrepreneur. The idea of being in a club or community or having some buffer between the investor and entrepreneur seems key to meet the various restrictions in different geographies.