Unlike traditional forms of financing, in which one investor typically takes a larger stake in a project, with crowdfunding you can attract a ‘crowd’ of people – each of whom takes a small stake, and contributes towards an online funding target. The rise of crowdfunding platforms such as Kickstarter in the US and Crowdcube in the UK have provided both projects and investors with the first real, organised and scalable way of interacting.
Crowdfunding also provides projects with a powerful way of building communities and interest, whether it be in a start-up business idea, a new film or a charitable scheme. These early stage supporters can provide invaluable confirmation of the merits of an idea and save projects significant time and cost that might be involved with more traditional routes to finance.
Broadly speaking there are three types of crowdfunding platform:
Reward based – sites such as Kickstarter enable projects to raise funds in return for rewards. For example an author might offer backers a signed copy of his book, access to a launch event or the chance to be a named character, depending on the level of support that they offer.
Peer to Peer Lending or Crowdloans: sites such as FundingCircle connect projects direct to a crowd of investors who are willing to lend money to a pool of businesses or individuals.
Equity based: sites such as Crowdcube enable businesses to raise funds from the crowd in return for giving up equity in their business.
Choosing the right platform is a critical part of the crowdfunding process and will have a huge effect on whether your campaign is a success, and so it is something that I will cover in detail in the rest of the site.
The current economic climate has encouraged many people to become interested in striking out and starting their own businesses. Technology has grown to the point that many people can start businesses, and earn money, with the help of the Internet. For those working from home, costs might be low initially, but expansion might require something more. And, of course, if you are a small business starting out in a different location you need start up cash immediately.
Getting that cash can be difficult if you can’t the angel investment you need, or the venture capital you require. And what if the bank turns you down for a loan? Small business fundingisn’t easy. However, with the help of crowdfunding many businesses are starting to get off the ground.
Crowdfunding works in much the same way as microloans for the poor. You receive a large number of small cash infusions, rather than one or two large ones. Multiple investors can band together to pledge amounts of money ranging from one dollar to thousands of dollars. Web sites like Kickstarter have really taken off in the United States. In Canada, though, the trend is slow to catch on. Sites like Ideavibes and Startup Fuel are offering crowdfunding services, but the regulatory situation in Canada provides challenges to crowdfunding.
In some cases, efforts to fund an enterprise are more like donations. Contributions to the startup are made, and the person giving the money may only be listed as a supporter, and receive no tangible benefits. In other cases, business owners offer finished products, or provide discounts, in return for financial support. So, an “investor” might not own equity in the company, but he or she can expect to be among the first to receive a product, or get some other special perk. (I funded a friend’s comic book at a level that allows me to be a background character and get artwork on top of a free copy of the comic.) This type of crowfunding is popular because securities regulators don’t have to get involved. “Investors” receive “gifts” or recognition, and that is the end of it.
The United States just recently passed a law that eases requirements for crowdfunding that involves an equity model allowing investors to receive an actual interest in the business profits. This is where regulatory agencies come in. The United States just passed a law that helps exempt crowdfunding from some of the more onerous requirements of business and investors involved. In Canada, the snag is that there is no national regulatory agency.
With the equity model, investors truly are investors, and receive some sort of interest in the company, and receive an on-going benefit. However, in Canada the ability to raise funds for your business with the help of crowdfunding is limited by the fact that you would have to meet requirements in 13 different provinces and territories. Unlike the U.S., one rules change doesn’t solve the issue. There would have to rules changes with each of the Canadian securities regulators. And, if one province/territory changed the rules, the funding could only be raised in that region; no nationwide push for funding.
So, while crowdfunding might help your business, it might take a while for it to really catch on Canada — especially if you want to pursue the equity model.
Posted From ; http://www.kisskissbankbank.com/en/pages/faq/basics
We've had one or two people ask us about crowdfunding. In a nutshell it's a simpler way to buy tickets or DVD's and support the festival!
You buy your ticket as normal but you are not charged unless we reach our target. Couldn't be easier.
You can also get as involved as much as you want. If you just love prog and want to see it survive then a £9.99 DVD is a simple but affordable way to help the festival. If you are passionate about prog, spend a little more and be a festival patron. Get your name in lights on the DVD cover and film credits. Crowdfunding is the future and you are not committing any funds unless the festival reaches it's target.
Crowdfunding is a method of funding that allows individuals to utilize their personal networks to raise capital and support their cause or business. Campaign organizers create an online profile to explain their fundraise goals and share their project with friends, family, social networks, etc.
Crowdfunding is a method of funding that allows individuals to utilize their personal networks to raise capital and support their cause or business.
Crowdfunding profiles can be made for both for-profit and non-profit purposes. Fundable is a crowdfunding platform that focuses exclusively on helping entrepreneurs and startup businesses find funding. Businesses can participate in two types of crowdfunding, exchanging either rewards or equity for funding. Check out our resources below to learn more about the history and benefits of crowdfunding.
Crowdfunding, or crowd financing, is a practice whereby a person or a company (fund seeker) raises small amounts of money from a large number of contributors (funders), typically via social media.
The money can be raised to support a wide variety of activities, for example, to stage a cultural event, to produce a film or an album, to help disaster victims, to back the development of a technology product or to jump-start a business. There is no financial institution or intermediary between the fund seeker and the funders: the solicitation is direct.
Although not new, this funding model is gaining momentum thanks to the popularity of the Internet and social media, which enable fund seekers to reach a large number of people worldwide. Multiple crowdfunding sites have been created to help bring these parties together.
Remember when you were a child and needed to raise money for something special (e.g., to build a treehouse or buy a bike or toboggan)? In my case, I would ask every family member to donate to my cause. In a way, this was a form of crowdfunding: soliciting funds from a group of individuals to help build or buy something special.
Fast-forward a decade or so (in my case a depressing 30 years), add technology advances and business methodologies and we now have entrepreneurs raising funds not only to build something special, but to change the world in the process.
What is crowdfunding?
According to Wikipedia, crowdfunding (sometimes called crowd financing, equity crowdfunding or hyper funding) “describes the collective effort of individuals who network and pool their money, usually via the Internet, to support efforts initiated by other people or organizations.” In MaRS’ case, entrepreneurs could use crowdfunding to fund their startups.
The “poster child” among startups using crowdfunding today is watchmaker Pebble, which used a reward-based model to raise US$10.27 million from 68,929 people, making it the most crowdfunded startup. According to Crowdsourcing.org, crowdfunding platforms raised $1.5 billion globally in 2011.
Pros and cons of crowdfunding
There are many pros and cons associated with crowdfunding for Ontario entrepreneurs. MaRS client Myke Predko, co-founder and CEO of Mimetics Digital Education, says: “Crowdfunding provides an excellent way for entrepreneurs/startups to get their message out to prospective customers in a low-cost, low-risk manner.”
But it might not be for everyone. Here is a short list of the pros and cons:
There are various crowdfunding models:
Examples of leading crowdfunding platforms
A crowdfunding platform’s primary revenue model is a percentage-based commission on funds paid out to entrepreneurs. A few also generate income by offering white label solutions and cash management by maintaining responsibility for netting and settlements (Source: Crowdsourcing.org).
This information was provided by the Securities Division of the North Carolina Secretary of State’s Office. The Internet has become an inexpensive and easy way for individuals and businesses to raise money for their activities. Congress recently passed the JOBS Act, which directs the Securities and Exchange Commission (SEC) to create rules exempting crowdfunding from the securities registration laws. Once implemented these rules will remove restrictions on start-up companies seeking investors over the Internet. Investors should be on the lookout for unscrupulous issuers and intermediaries who may attempt to engage in crowdfunding before the rules are written or misuse crowdfunding to steal from investors through false and misleading representations.
What is Crowdfunding?
Crowdfunding is an online money-raising strategy that began as a way for the public to donate small amounts of money, often through social networking websites, to help artists, musicians, filmmakers and other creative people finance their projects.
The concept has recently been promoted as a way of assisting small businesses and start-ups looking for investment capital to help get their business ventures off the ground.
Traditionally, investment opportunities are offered by professionals, such as broker-dealer firms and investment advisers, who must recommend investments that are based on their clients’ investment objectives and levels of sophistication.
Through crowdfunding, individuals are able to invest in entrepreneurial start-ups through an intermediary, such as a broker-dealer or a “funding portal.” By law, “funding portals” are not allowed to provide investment advice.
What is a funding portal?
A funding portal is a website, also called a “platform,” that advertises the investment opportunities and facilitates the payment from the investor to the issuer.
Some portals advertise a variety of investment opportunities on one website, allowing the investor to select one or more projects in which to invest.
How Crowdfunding Works
Joe’s small business sells goat cheese made from his special pygmy goats. To keep his business afloat or to help it grow, Joe can turn to the Internet to seek online donations from the public who contribute small amounts of money and expect nothing in return. Joe usually sends a sample of his cheese as a thank you for the donation; large donors might even get a cheese named in their honor.
New legislation has directed the SEC to write rules that will change how Joe can raise money online. Once the rules are written, Joe will be able to use the Internet to raise up to $1 million each year by selling investments in his company to thousands of investors. Because Joe will be issuing shares in his company in exchange for investment capital, his supporters are no longer donors; they become investors and will expect a financial return for their investment.
Why Investors Must be Extremely Cautious About Crowdfunding Investments
• Crowdfunding investments cannot be offered legally until the SEC adopts rules to permit them. Beware of offerings that seek investments immediately.
• All investments have risk, but small business investments have even greater risk than normal. About 50 percent of all small businesses fail within the first five years.
• Funding portals must be registered with the Securities and Exchange Commission (SEC), belong to a self-regulating organization (SRO), and comply with other rules the SEC may issue.
• Crowdfunding portals claiming an accreditation or “seal of approval” from a standards program or board may not be legitimate.
• Issuers using funding portals to raise money may be inexperienced. Their track records may be unproven, unsubstantiated or outright fraudulent.
• The information about the investment is limited to what is provided through the funding portal. Investors may need to rely on their own research to determine the issuer’s track record.
• Because state regulators are not allowed to review crowdfunding issuers or their offerings, full and complete disclosure may not be available to investors.
• Investors may have limited legal ability to take action against the issuer should the investment not perform as represented. Due to limited regulatory oversight over these offerings, investors may be left on their own to pursue costly private lawsuits when things go wrong.
• Crowdfunding investments are mostly illiquid and investors must be prepared to hold their investments indefinitely. It also may be difficult or impossible to resell these securities due to the lack of a secondary market.
The Bottom Line
It pays to be skeptical of investment opportunities you learn about through the Internet.
When you see an offering on the Internet - whether it is on a funding portal, in an online newsletter, on a message board or in a chat room - you should be cautious until you have done your homework and proven that it isn’t a scam.
If you have any questions about crowdfunding offerings, contact the North Carolina Securities Division at (800) 688-4507 or www.sos.nc.gov .
Posted From ; http://www.asheville.bbb.org/GIReport.aspx?NewsID=288