Equity Crowdfunding: 5 Things to Know About the Future of Raising Money

Crowdfunding_Future-618x400 (1)Here’s one: The perk-based crowdfunding you already know and love isn’t going anywhere  Crowdfunding sites can now solicit select wealthy individuals to invest in their movies and pursue profits rather than trinkets and perks. Though this is a major development, the evolution of film financing is far from over.

Title II of the JOBS Act went into effect late last month, allowing open solicitation of monies, but it will be several more months before the Securities and Exchange Commission approves regulations for Title III of the bill. This provision, passed last year, allows anybody — not just accredited investors — to actually invest in a product pitch, not just donate to it.

Indiegogo — a major crowdfunding platform that pioneered the practice — is waiting for Title III to go into effect before making any changes to its business model. Still, plenty of eager businessmen have jumped at the opportunity to serve as an intermediary between aspiring entrepreneurs and the millions of accredited investors living in the United States.

Here are five things you should know about the future of crowdfunding.

1. Be wary of brokers asking for your money.
Kickstarter and Indiegogo are household names thanks to their role in shepherding the crowdfunding revolution, yet neither of them are on-board for brokering investment in crowdfunding projects – at least not yet.

Several other smaller players have declined to participate as well, leaving a glaring hole in the market.  At least 1,6000 different companies have registered under the JOBS Act hoping to serve as an intermediary between investors and crowdfunding campaigns.

While the SEC has laid out rules about fraud and misbehavior, filmmakers and potential investors should still be wary.

While the SEC has laid out rules about fraud and misbehavior, filmmakers and potential investors should still be wary.

“The issue right now is brokers and dealers,” Cinetic Media’s Ross Fremer told TheWrap. “Who will the intermediaries be?”

There have been several lawsuits already over crowdfunding, and bringing investment into the equation only increases the likelihood. One prominent crowdfunding company declined to participate in this story for that reason, fearful that shady dealers would undermine this latest push.

“The film business has always had a pockmark on it from serious investors; film producers are unscrupulous and hoodwink people,” Michael Roban,  exec VP of financing at IM Global, told TheWrap. “This provides a vehicle for unscrupulous people.”

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