Is Equity Crowdfunding an Oxymoron

oxymoronWhile people wait for the SEC to implement rules for equity crowdfunding authorized under the JOBS Act of 2012, many companies are racing forward with project based crowding. Research just published in an Amazon Kindle book “Is Equity Crowdfunding an Oxymoron” indicated that entrepreneurs with some prior track record are much better off raising capital via rewards based crowdfunding than trying to attract venture capital. Besides not giving up ownership the campaigners can raise the money more rapidly than going the venture capital route.

Crowdfunders with the most success are developers who already have a product on the market. The Veronica Mars campaign on KickStarter raised $5.7 million from a fan base estimated at 2 million. Many venture capital firms also require a company to have some prior sales before considering funding a venture. In fairness to VCs, they provide a lot more than just money to the ventures they back, and the book examines these services.

Equity crowdfunding is already underway in the UK. Early results at indicate that the average amount raised is about a quarter of a million dollars. The top business categories for companies that have been funded are; retail, food and drink, and professional services. If the UK experience is an indication of what’s to come in the US, companies funded by equity crowdfunding will be local service businesses rather than companies with major technology innovations. Only 7 percent of the companies funded by Crowdcube were classified as technology companies

If you are an entrepreneur seeking funding for a new venture or an investor searching for new profitable opportunities you should read this book. Crowdfunding is being used to raise money for everything from the latest video game to renewable energy projects. The four types of crowdfunding and key components of a crowdfunding campaign are described. The most important factor to success in crowdfunding is uncovered.

While some people wait for the SEC to set rules for equity crowdfunding authorized under the JOBS Act other people are moving forward with project, based crowdfunding. Project crowdfunding is proving to be a preferred alternative to traditional equity financing for many ventures. However, crowdfunding is not for everyone. The funding process used by venture capital firms and angel investors is compared to crowdfunding to determine which funding alternative is best for a new venture.

Equity crowdfunding is legal in several countries outside the US. The operations of the largest crowdfunding platform, Crowdcube, are described and a profile of the companies funded to date is provided. Finally, the book explores the possibility that crowdfunding may be replacing the void in business finance created by commercial bankers who have all but abandoned small business.

You can find the book at:

[Source: Thomas Miezejeski @ CrowdfundingPr.Org]


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