Crowd Funding

On November 3, the U.S. House of Representatives passed H.R. 2930 (the “Entrepreneur Access to Capital Act”), a crowdfunding bill that will allow startups to offer and sell securities via crowdfunding sites like Kickstarter, as well as social networking sites such as Facebook and Twitter.

this change could be huge for startups and lifts certain securities law prohibitions that have been on the books since the 1930s.

Until the crowdfunding bill becomes law, startups should avoid selling stock or other securities via crowdfunding sites or social networking sites.

Scientists have joined the ranks of those asking the public to help fund their work. Their research projects hide among the art, video and book proposals on large crowd funding sites like Kickstarter, RocketHub and IndieGoGo. You can find a neat project here, but choose carefully: not every science project here is run by scientists, nor has it been reviewed by scientific experts.

Projects on these sites are looking for an injection of cash to continue a specific project. But other scientists have turned to the crowd for help with long-term costs: salaries.

A majority of our contributions came from people we know. Our enthusiastic team of Tweeters, Facebookers, and staff who supported the campaign and alerted their friends and followers brought us a strong a first-tier network of funders.

The IndieGoGo staff selects campaigns they believe exhibit a high “GoFactor” to highlight on the first page of results

There are loads of articles on the web with ideas for perks from successful campaigns, but keep in mind that those benefits should be thoughtfully tied to your core project.

Kickstarter emphasizes project-based funding campaigns, and the projects they accept generally need to have a definite end-date and clear metrics for completion and success. For businesses just starting out (like ours), the lack of an “end” to your vision may preclude you from qualifying. But where Kickstarter focuses on funding projects to completion, IndieGoGo promotes the broad funding of ideas, from for-profit businesses to not-for-profit causes to creative endeavors.

We went with IndieGoGo—we didn’t meet Kickstarter’s project-oriented criteria—and we were charged 9% on the contributions we received (a fee that gets kicked down to 4% if the campaign reaches its funding goal).

make sure someone on your team can have a strong, dedicated focus on the campaign—it won’t take off without it.

The hope is that crowd funding will give kitchen-table investors the ability to buy in to a much broader range of opportunities, and will give start-ups access to a whole new pool of capital—the money sitting in every American’s checking or savings account. Advertisement placeAd2(commercialNode, 'midarticleflex',false,'') One site that is experimenting with something like this is SlowMoney, profiled by journalist Amy Cortese in her 2010 book Locavesting. SlowMoney facilitates investment clubs that evaluate proposals from farmers and other purveyors of local agricultural goods

It gives a massive pool of investors—basically everyone—access to a wide range of companies. And it gives that wide range of companies access to a massive pool of investors.

Seeded by the Grameen Bank, industry trailblazers like Kiva and Prosper applied the concept of microlending to the Internet, spawning people-to-people lending. The newest breed of microfinance — crowdfunding — is fast growing in popularity.

Despite travails, van Houtryve sees a lot of promise. “It’s an intuitive model,” he says. “Backers have started to pose relevant questions. As my project proposal has made its way through social networks and attracted support from strangers, I’ve made some really fruitful new connections. In addition to generous funding contributions, several individuals have stepped forward with key contacts and very precise and helpful advice. I have already managed to make stronger photos due to their input. This is a pleasant shift over the lone-wolf existence.” The attraction of an initiatives such as Emphas.is are their transparency.

The bill provides a crowd funding exemption from Securities and Exchange Commission registration of securities offerings, with certain limitations: A $10,000 limit per investor (or 10 percent of annual income, whichever is less). A cap on the amount a company can raise of $1 million per offering (and up to $2 million if audited financial statements are provided). No limit on the number of accredited or unaccredited investors.

newer (and crowd-based) tools to monitor online reputations are emerging. Either way, the potential to unleash untold numbers of new ventures is certainly exciting for would-be entrepreneurs.

What makes Kiva “social” are some of the typical features you would have in a social network, like pictures, profile, updates; but more than that, it’s that sense of personalisation that originates from knowing what you’re doing with the money you’re giving.

One of the first peer-to-peer lending site to launch was Zopa, a London-based company providing an online money exchange service. Zopa operates within the UK, Italy and a service is being developed for Japan.

 In 2006, Prosper was launched in the US, following the same model.  In 2007, LendingClub launched the second peer-to-peer lending site

Startups don't just need money -- they need expertise. In the current scheme of things, investors often provide that expertise. They became wealthy because they know something about how to run a successful business.

But in a crowdsourced model, no one investor has substantial money in the venture. So there's no one who could insist on a board seat as part of their deal, or otherwise make an entrepreneur take their ideas seriously for how to grow the business. That makes the startup a riskier venture, both for the investors and the entrepreneur.

ON NOVEMBER 3rd, surprisingly, a bill was passed by the House of Representatives with strong bipartisan support. The Entrepreneur Access to Capital Act aims to make it easier for small businesses to raise money through “crowdfunding”. For the first time ordinary investors would be allowed to put up to $10,000 in small businesses that are not registered with the Securities and Exchange Commission, enabling Joe Schmo to win big if the company becomes the next Google.

Start-ups are especially needy now, since many banks are loth to lend even to well-established companies.

Jack Herstein, president of the North American Securities Administrators Association, says the only jobs created will be “more jobs for securities investigators”. The current bill does not require start-ups to give detailed information about their business plan, and since stakes in businesses are illiquid, investors will not be able easily to get their cash back.

Though the initiative went smoothly, the entrepreneurs don't plan to participate in crowdfunding again—at least not anytime soon—because they say it would send the wrong message to their supporters. "If we asked for more money, that would be far-fetched," says Mr. Gaffney. "We don't think people would donate twice." In addition to being able to raise money via crowdfunding only so many times, entrepreneurs say another caveat is that some people find the tactic offensive. Others say would-be contributors aren't always comfortable sending money through crowdfunding services.

The convening power of the Internet, rapid advances in technology, and the reduced costs of launching a social enterprise in today's wired world are driving the race to create business models brimming with purpose. In this environment, social entrepreneurs like these are developing new solutions to take advantage of these advances and recreate yesterday's broken business models.

One example of their approach is crowdfunding -- the collective cooperation by people who network and pool their money together. And the implications, from technology to community-powered renewable energy to political campaigns or to financing the next wave of social enterprises, are immense. Think about how the Obama campaign flipped the standard campaign fundraising model on its head through harnessing small repeatable donations from the crowd.

It's an opportunity that has the potential to transform the business, political, and charitable landscapes. And it's already happening.  In this discussion, we ask for your insights on this current trend.  Some questions to consider:   1. What business model for social impact does your organization use?
 2. Does an opportunity exist for crowdfunding to scale your impact?   3. Besides the examples noted above, can you think of other possibilities to harness crowdfunding for good?     4. What isn't sustainable about your business model? Why? Could "tapping the crowd" for funds enhance your sustainability?

With credit still tight and venture capital out of reach for many small firms, "crowdfunding" sites such as Crowdcube offer an attractive alternative.

By raising small sums from many individuals, businesses can access the capital they need to grow and thrive, often more quickly and on better terms than with conventional sources.

Crowdcube, founded in 2010 in Exeter, calls its crowdfunding model "the next generation of business investment."

An interesting new development on this type of funding is its expansion in the area of crowdfunding entrepreneurial businesses.

Two UK companies are however pioneering the provision of finance through lending and equity investing from the crowd. Fundingcircle, founded in 2010 allows the general public to directly lend to businesses seeking finance, allowing them to quickly access capital without having to go through the banking system. So far several thousand lenders have provided loans worth some £24 million. Crowdcube, also launched in 2010, allows individuals to take an equity stake in a company raising finance.

Crowdfunding supporters argue that while raising money is the most important benefit the platform provides, another important advantage of this new source of finance is the power of "collective intelligence" i.e. the ability to mobilise the wisdom of crowd by asking investors to actively participate in new product development (e.g. by voting on their preferred product or services) and actively contribute to the due diligence of the opportunity by sharing their expertise.

Republicans and Democrats may finally agree on something: Small business owners and entrepreneurs need better and more plentiful opportunities to gain access to capital, grow their businesses, and create more jobs.

Last month, the House voted 407 to 17 to pass passed the Entrepreneur Access to Capital Act, which seeks to makes it easier for small businesses and entrepreneurs to raise capital through crowdfunding.

"This bill will make it easier for entrepreneurs to raise capital and create jobs," the White House noted in a statement.

Finding funding can be one of the biggest challenges for social entrepreneurs.

Family and friends have been one of the most common sources of venture funding capital for centuries. Crowdfunding takes this age-old source of venture funding and brings it into the digital age.

33 Needs: Connecting microinvestors & social enterpreneurs 133needs

Plus, if Launcht had been legal and available in 2007, it would have allowed us to take smaller amounts from a larger group of investors. This would have reduced the pressure on us to produce big returns for each investor, because each investor would have had less at risk. It also would have given us access to more people who would have been vested in our success, which would have produced more leads and opened more doors.

Plus, if Launcht had been legal and available in 2007, it would have allowed us to take smaller amounts from a larger group of investors. This would have reduced the pressure on us to produce big returns for each investor, because each investor would have had less at risk. It also would have given us access to more people who would have been vested in our success, which would have produced more leads and opened more doors.

collaborative thinking can provide solutions faster

by involving people in the early stages, they will feel more connected to the project

1. Crowdrise

To catch the eye of potential funders, you’re going to need to stand out, engage your community and close the sale.

Are you a creative? Be sure to check out Kickstarter or IndieGoGo.Looking to start more of a traditional, albeit entrepreneurial, business? Head over to ProFounder.Does your idea have a social bent? You might do well at Buzzbnk or 33needs.Non-profits can fundraise at sites like CauseVox or FirstGiving.

Many of the successful projects on crowdfunding sites target a specific, narrow audience.