By Monty Munford 27 Oct 2013 First there was crowdsourcing, then crowdfunding and then rewards-based crowdfunding models such as Kickstarter. But perhaps equity-based crowdfunding is the model that will change the way startups will raise money.
If you’ve ever wanted to invest in an American sportsman, now’s your chance. For $10 a share on the Securities and Exchange Commission, investors can buy an interest in the future earnings of one Arian Foster, a 227-pound running back with the Houston Texans (an American Football team in the NFL).
More than a million shares were offered by a company called Fantex that is beginning to specialise in ‘career-based’ crowdfunding. First it was rewards-based crowdfunding, then equity-based crowdfunding and now it appears career-based, as well as the previous ‘fan-based’ crowdfunding.
The precedent of fan-based crowdfunding was not in the US, but in a football team that was then in the Conference League, the 5th league in the English pyramid of football leagues.
The team was called Ebbsfleet United, a team previously known as Gravesend & Northfleet F.C. until the 2007-08 season; England football manager Roy Hodgson played 59 times for the club between 1969 and 1971.
It was then taken over by a crowdsourced outfit known as MyFootballClub that asked 27,000 MyFootballClub members to pay £35 for a £700,000 takeover fund and all to own an equal share in the club without making a profit or receiving a dividend.
This sounded all so terribly modern, but it petered out rather quickly. Thirty months later after a high point of 32,000 subscribers, membership had dwindled by 90% and the club is now owned by a group of Kuwaiti investors, although the club has managed to maintain its position in the ‘fifth division’.
Crowdfunding on contemporary sites such as Kickstarter has seen similar support fizzle out after a huge amount of fanfare. While there have been several notable successes, many of these projects have become graveyards for games projects that are infamous for their costs and long cycles.