AARP Using Crowdfunding to Start Your Business

Active Desk Rider invention combines exercise bike and computer work desk.

by Joe Eaton,

Sitting pretty: Jim Martin’s Active Desk team hopes to draw investors through crowdfunding. — Kevin J. Miyazaki/Redux 

Investing in You

Like many entrepreneurs, Jim Martin built his big idea in the garage. Martin, a 55-year-old associate professor of exercise and sport science at the University of Utah in Salt Lake City, fashioned a pedaling workstation from an old recumbent bicycle and some lumber. The bike-desk, he thought, would not only help deskbound workers pump off the pounds, it could also make a great business.

But Martin faced the classic start-up quandary: How to fund it?Building enough desks to launch a business could run $250,000. A traditional lender would be unlikely to stake him that much on anuntried business. Was he willing to cash out his retirement and tap his daughters’ college fund? “I guess I am just too conservative for that,” Martin says.

Instead, he turned to the university’s Technology Commercialization Office, which helps faculty convert research into businesses. It suggested a new tool for raising start-up cash — equity crowdfunding.

Here’s how it works: Fledgling companies launch fundraising campaigns on websites where investors can purchase equity or debt. If the business succeeds, those shares of the company will rise in value and can be sold for a profit. But no money changes hands until the company meets a predetermined funding goal.

Technology & Electronics Discounts for AARP Members — Save on gadgets for home and on the go.

Crowdfunding itself isn’t new. Since 2009 the best-known funding platform, Kickstarter, has raised more than $450 million for projects ranging from amateur satellites to pop albums. But Kickstarter-style projects rely on a tin-cup donation model: Contributors receive perks such as a T-shirt or a mention in a funded film’s credits. Equity crowdfunding turns donors into investors.

And this practice enjoys the bipartisan blessings of Congress: In April 2012 the Jumpstart Our Business Startups (or JOBS) Act paved the way for small companies to offer stock online. The idea was to stoke job creation by making it easier for entrepreneurs to raise money.

It’s still not clear when money will begin changing hands. The Securities and Exchange Commission (SEC) has to release crowdfunding regulations before Web portals can start offering equity. But fans of the model have declared that equity crowdfunding will shake up the investing world. “This is a monumental shift in the way small businesses raise capital,” says Alon Hillel-Tuch, a founder of the crowdfunding website RocketHub, which is considering offering equity. Since word got out about the JOBS Act provision, RocketHub has received hundreds of inquiries a week from businesses, Hillel-Tuch says.

Proponents of equity crowdfunding say it will give the general public a first shot at start-up and small-business investing. Currently, start-ups seeking cash usually rely on venture capitalists and deep-pocketed “angel investors.” Sherwood Neiss, principal of Crowdfund Capital Advisors and coauthor of Crowdfund Investing for Dummies, says the new rules will let smaller mom-and-pop investors in on

more on http://www.aarp.org/money/investing/info-10-2013/crowdfund-investing-in-small-business.html

 

Tags: ,

HEADLINE NEWS

This RSS feed URL is deprecated, please update. New URLs can be found in the footers at https://news.google.com/news [...]

NPRAfter Outcry, Crowdfunding Site Patreon Backs Off Plan To Raise FeesNPRThe popular crowdfunding service Patreon has backed off plans to change its payment structure, after widespread, vocal and passionate opposition from creators and their fans. Last week, the site announced it wou [...]

CoinDeskKickstarter ICO? Don't Count On It Says Crowdfunding Leader ...CoinDeskThe company most widely associated with crowdfunding, Brooklyn-based Kickstarter, has no plans to get into the initial coin offering (ICO) business. Coming in response to the news yesterday that compet [...]

TechCrunchHow hate speech crowdfunding outfit Hatreon crept back online ...TechCrunchIf you want to make a living creating white supremacist content, you're probably not going to do it via sites like Kickstarter and Patreon, which prohibit hate speech. Fortunately there's Ha [...]

Bitcoin News (press release)Crowdfunding Giant Indiegogo Joins the ICO BandwagonBitcoin News (press release)Crowdfunding Giant Indiegogo Joins the ICO Bandwagon Indiegogo is a popular crowdfunding platform headquartered in San Francisco that was founded in 2008 by Eric Schell, Slava R [...]

HuffPostIs Crowdfunding Really a Good Idea for Innovation?HuffPostHere's a head-scratcher for you: according to new research, if you refer to your product or idea as both “novel” and “useful” in your crowdfunding campaign, your funding will be lower than it would if you just decl [...]

Coindesk (press release) (blog)Crowdfunding Giant Indiegogo Opens to ICOs - CoinDeskCoindesk (press release) (blog)The startup revealed today that, through an existing partnership with MicroVentures, it will begin offering services to projects seek to use the blockchain funding model. [...]

FortuneWant to Hold Your Own ICO? Indiegogo Can Help You With ThatFortuneCrowdfunding sites like Kickstarter (kickstarter, +0.00%) and Indiegogo raised start-up cash for a generation of online entrepreneurs, but one increasingly visible method of internet-sourced financing seemed to h [...]

ForbesCrowdfunding Do's And Dont's From iFundWomen's Karen CahnForbesDuring our conversation, she was transparent in sharing that her first software company, VProud, failed because she “did everything backwards” and spent too much time trying to perfect the product. “Pe [...]

TechCrunchFormer Gawker employees are crowdfunding an effort to buy Gawker.comTechCrunchWhile Univision acquired most of Gawker Media's sites last year (and renamed them as the Gizmodo Media Group), the deal didn't include Gawker itself. In fact, BuzzFeed reported last month [...]

CFB Finance

Marketwired

  • Crowdfunding
  • Crowdfund
  • Peer to Peer Lending
  • FinTech
  • Reg A+
  • Reg CF
  • Crowdfunding USA

Press Release

Live Crowdfunding .tv

What's Next Step in Regulation A+ JOBS ACTS Title IIII :L Interview : Steve Cinelli with Brian Korn Securities and Crowdfunding/Peer-to-Peer Lending Lawyer, Watch more video library | Conference | Interview | Campaign Showcase | Research | Education |