Crowdfunding to help find investors for your business?

Lorraine Harrington, writing in Inside Tucson Business, did a useful thing: she actually listed several sites that do ‘crowdfunding’ or attracting investors from all over the world to fund your startup. This is a neat trend, as we’ve written before, and as a result of the Obama JOBS Act. Theoretically, the Securities and Exchange Commission is going to write rules for investing in crowd projects, but at least one site, Second Market, has said that they’re not waiting for SEC rules or, of course, the SEC website. Which is a good thing, because the SEC announced in early that they weren’t going to meet the congressionally imposed July 4 deadline. We’re not sure why, since the SEC has already got pretty explicit guidelines for small security investment in the US, and it wouldn’t be a stretch to put them up on the SEC website and go global.

Anyway, the crowdfunding websites that Lorraine listed were Kickstarter, Indiegogo, WeFunder, Microventures and Crowdfunder. You can Google all of them to see which best fits your project, but for businesses in general, we were most impressed with Microventures and Crowdfunder, because both had a wide variety of startups for which the starters were seeking money, and the amounts being sought were realistic in our view: $100k to $500 k.

We noticed that there didn’t seem to be much evidence of business plans in the listed businesses, but possibly those are available after signing a non-disclosure and statement that one isn’t risking more than 10% of his/her net worth by investing. The latter is a key SEC guideline.

Where do we come in?

If going any funding route with outside capital, we’d like to see startups use our business plan templates, take our top four startup courses (A02, A03 A05, A11 and A12) and so certify to potential investors. That would give us, at least, a warm feeling that the startup owners know what they’re doing and have a pretty high potential for success.

If you’re going to go the crowdfunding route, as Lorrane says, you have got to be prepared for more disclosure of finances, strategy, etc., that if you were to work with a venture capital firm or friends and family. And, you’re not entirely sure who’s funding you, even if the requisite documents are signed.

 

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