Crowdfunding may be a natural fit for cleantech, where conventional early-stage funding has fallen off. Last year global venture capital flows to the sector plunged 33 percent, to $6.46 billion.
When Pi Investments recently lent $200,000 to solar energy projects via Internet crowdfunding platform Mosaic, it saw more than an opportunity to back clean technology. The Chicago-based family office was also keen to “peek under the hood” of a new investment infrastructure, says director of impact investments Aner Ben-Ami. Through crowdfunding outfits like Oakland, California-based Mosaic, small and medium-size U.S. companies can offer debt and soon equity stakes to the public.
“Part of the reason we wanted to be a part of this experiment was to see how it evolves,” says Ben-Ami, whose firm manages the wealth of a member of the Pritzker family, which owns the Hyatt Corp. hotel chain. He thinks crowdfunding may be poised to take off in the cleantech space: “There is demand from investors for greater access to these sorts of assets.”
So far, U.S. crowdfunding platforms, such as New York -based Kickstarter, have largely traded in trinkets like T-shirts and product discounts in exchange for donations to start-ups. But the Jumpstart Our Business Startups Act of 2012 allows those organizations registered with the Securities and Exchange Commission to open up investment activity to nonaccredited investors. Accessible to the public in several countries, including Australia, Germany and the U.K., equity-based crowdfunding won’t hit the U.S. market until the SEC finalizes the JOBS Act regulations, probably later this year. U.S. retail investors already participate in debt-based crowdfunding under existing regulations. But may would-be providers are waiting for the new rules, which were devised so that platforms can set up shop for a few thousand dollars, rather than several hundred thousand dollars, in regulatory expenses.