On Wednesday, New York-based Return on Change revealed that a cleantech startup, Geostellar, used its website to close a $1 million round. It is the first company using Return on Change to break seven figures in one campaign, giving some credence, Return on Change CEO and founder Sang Lee says, to equity crowdfunding as a way for sophisticated startups and investors to do deals.
“This is definitely going to change the reach, as well as the power, of startups for raising capital,” he says.
Unlike crowdfunding sites such as Indiegogo or Kickstarter, Return on Change is limited to accredited investors—people who meet the income thresholds in SEC regulations governing private company investment. Such investors get a stake in the startups rather than early access to products being developed, which is the norm for general crowdfunding.
Return on Change works with startups that operate in five sectors, each of which touches on sustainability in some way: cleantech, edtech, life sciences, social enterprises, and technology.
“Whether it’s about society or environment, every business has its own flavor on how they intend to promote sustainability,” Lee says.
Geostellar, based in Washington, DC, is an online marketplace for financing and installing solar panels on rooftops. The funding round for the startup, Lee says, is an important milestone for Return on Change.
Initially, Geostellar sought to raise about $500,000, but increased the ceiling on the campaign—and it seems the company is not done yet. “We’ve been engaged with them for a follow-on transaction which we’ll be announcing shortly. They’ll be going for a much larger round,” Lee says.
The successful campaign by Geostellar, Lee says, could help squash the myth that only lower-quality companies turn to equity crowdfunding to raise money. “We’re seeing very established entrepreneurs who have been backed by prominent investors use platforms like ours,” he says. For example, Geostellar previously raised almost $14 million in 2012 in a round that included energy utility NRG Energy.
But even with Geostellar’s successful fundraising, this path to capital is something of a moving target. The rules governing equity crowdfunding have yet to be solidified under the Jumpstart Our Business Startups (JOBS) Act, which Lee says makes some folks wary about participating. That has not stopped Return on Change, and others such as Crowdfunder, from forging ahead.