Tag Archives: entrepreneur

Crowdfunding: One Size Doesn’t Fit All

In this interesting article, Forbes asks the question ‘Is the
Crowdfunding Bubble About to Burst?’ At SoMoLend, we certainly think
so!

We love that Forbes is recognizing the power of crowdfunding and the
impact it will have on small businesses nationwide. The article
references Kickstarter, a crowdfunding pioneer, as an example.
However, it’s important to note that Kickstarter only represents one
model of crowdfunding, reward-based, and it’s not the right model for every
entrepreneur seeking funding.

We’d like to take a moment to elaborate and provide some clarification
about the different types of crowdfunding: 1) donation based
crowdfunding; 2) reward-based crowdfunding; 3) equity-based
crowdfunding and 4) lending-based crowdfunding.

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Donation-Based Crowdfunding
How it works: Crowds fund a project by donating money with no reward or financial return. As of May 2012, the average donation-based crowdfunding project raised $4,076. Donation-based crowdfunding is ideal for social or political projects seeking less than $5,000.

Reward-Based Crowdfunding
How it works: Crowds fund a project in exchange for a pre-determined reward of
value, such as a t-shirt, recognition, or the finished product. Reward-based crowdfunding is great for creative artists and inventors seeking micro-loans ($35,000 or less).
Reward-Based Crowdfunding Platforms: Kickstarter, IndieGoGo, RocketHub, peerbackers

Equity-Based Crowdfunding
How it works: Crowds fund a company and then become shareholders in that company. As of May 2012, the average equity-based crowdfunding project raised $84,597. Equity-based crowdfunding is perfect for entrepreneurs seeking up to $1 million who are investor-ready. These companies should be prepared to have actively involved funders with voting rights and shares.
Equity-Based Crowdfunding Platforms: Grow VC, Circle Up, Launcht, crowdfunder

Lending-Based Crowdfunding
How it works: Crowds fund a business by making a loan and are repaid each month with pre-determined interest rate and term. Lending-based crowdfunding
(sometimes called debt-based crowdfunding) is best for entrepreneurs seeking micro-loans who are financially able to repay a loan each month.
Lending-Based Crowdfunding Platforms: SoMoLend

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Invitation to chat with Crowdsourcing.org

On Monday 4/9 at 12pm EST, Crowdsourcing.org is hosting a live chat with their leadership group about establishing standard principals and regulatory framework in the crowdfunding industry.

Crowdsourcing.org sent the release below to SoMoLend and we would like to invite everyone interested to participate in this awesome opportunity!

Chat live with the leadership group behind the initiative to define a regulatory framework for the crowdfunding industry.

As President Obama signs the JOBS Act into law at 2pm EST on April 5, 2012, a leadership group consisting of equity and debt crowdfunding platforms and industry experts including legal, securities and SEC experts, have mobilized to explore the development of a self-regulatory framework for the crowdfunding industry. The JOBS Act requires that all equity and debt crowdfunding platforms be a member of a national securities association.  This leadership group will explore the various paths to meet that requirement in ways that protect investors and support a vibrant industry.

Chat live on Crowdsourcing.org with representatives from this group at 12pm EST/9am PST on Monday 9 April to ask questions and offer input regarding key elements of the framework including principals that will:

  • Establish strong protections for investors in the form of an Investor’s Bill of Rights, including tests to assess investors understanding of risk, criminal background checks on issuers, and adequate disclosures by issuers;
  • Ensure confidentiality of investors’ personal financial information;
  • Ensure that investors do not exceed statutory investment limits, by implementing standardized reporting and communication among platforms;
  • Establish standard communication processes for transparent flow of information between the issuer, the investor, the intermediary and the regulatory agency;
  • Develop a code of conduct for crowdfunding platforms, with enforcement mechanisms to punish bad actors;
  • Create a recognizable brand common to trustworthy intermediaries.

If you would like to participate, email Carl Esposti at carl.esposti@gmail.com with your name, company, and title so that they can include your information in the announcement.

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