Crowdfunding is raising money from friends and family to fund an idea, cause or business. Donation based is the most
common and Kickstarter and Indiegogo are
two popular sites. Money given to campaigns on these sites is considered a donation and often there is a perk like a t shirt or your
name in the credits of a movie. The most successful campaigns (millions of dollars) have typically been for companies who are offering a product (think presale) in exchange for a donation.
As a result of the
2012 JOBS Act, companies will
soon be able to offer equity or debt in their company in exchange for investment money. The SEC hasn't completed the rules for this yet, so companies have to wait until they are done. This could significantly expand the capital available to entrepreneurs and will allow unaccredited investors (that's nearly all of
us who are not wealthy) to invest in
people and ideas that we believe in. This type of investment is very risky because of the high failure rate, thus
people will be limited on the amount of money they can invest based on their net worth. Today, the biggest investment gains come from these type of
early-stage investments. Once the rules are complete and start up companies can offer securities, the everyday Joe and
Jane can possibly fund the next big idea like Google or AirBnB or Amazon.
To learn more about equity crowdfunding, CareerFuel has a comprehensive site created to educate entrepreneurs and would-be investors.
