So probably many people have heard of this bizarre phrase called crowdfunding. A concept invented recently it reflects literally what is sounds like.
Crowd = large group of people
Funding = process of gathering funds
Crowd + funding = gathering funds from a large group of people.
This as a standalone concept has existed for decades when a company issues securities by either issuing debt or equity. Not to bore anyone who doesn’t care about this, but effectively this is how companies are legally allowed to gather investors and how investors are able to generate a return from investing in these securities. The current legislation is place makes this process very difficult and expensive and as such is only really applicable for companies that have reached a certain size.
Recently a new phenomenon was borne. Concept existing largely to fund anything and Kickstarter was able to target creative projects and have demonstrated extreme success.
So what is the problem with start ups utilizing crowdfunding you say? In the united states, you are legally not permitted to solicit ‘investments’ on the Internet or on a general basis without registering with the government. So we are allowed to gamble and give away money on a non legally binding basis but we are not allowed to invest nominal sums of money in innovative and high impact start ups that we believe will either do extremely well or transform society for the better.
Legislation is in the works to allow this to happen. As per usual congress is holding up this legislation. Now we need to get into the good stuff, what will crowdfunding for for entrepreneurs… To be continued…