Crowdfunding and it's Future?

[Qbicle]

Hi Everyone,

I'm new to the forum and was just wondering if anyone would want to share their experience with different forms of crowdfunding or if there are any other forms of crowdfunding out there besides Equity and Reward Based systems.

I'd also love to hear people's thoughts on the newly passed Title III of the Jobs Act and the effect that it will have on VC's and their ability to provide assets outside of capital such as networking and mentoring.

Looking forward to hearing your responses and thoughts!

[vangogh]

I bootstrapped my business so I can't offer any experience in using crowdsourcing to finance it. I have supported some crowdfunded projects though. If you want to raise money through crowdfunding you either need a project that people truly want to support, like the first Pebble watch, or you already need an audience that you can point to your project and ask them to support it.

[Harold Mansfield]

I've never used Crowdfunding either, but like VG have supported quite a few. I do follow the industry and a lot of projects and news.
I can't tell you about other kinds of crowdfunding. Most of the ones I've supported for were to get the first product off of the assembly line.

I don't think Title III will have much effect and it's a few years too late. With the amount of flops, frauds and over valuations of some products and tech start ups people are being a little more careful. It's not tech Christmas anymore.

I think if you have a good product that offers something that people want or need and has scale... it's a viable way to raise funds. However, many projects don't raise anything at all, or never reach goal. It takes a solid marketing plan to get the attention of potential investors and supporters, and then of course you have to deliver.

A lot of Crowdfunding projects have no scale. It's just someone looking for start up money to create something that doesn't have much value other than for them.

If there's going to be any change going forward I'd say that there's probably less money out there now than there was last year and those that get it will have to be spectacular ideas with some kind of proof of concept. Ideas are a dime a dozen. Everyone has them and most aren't original. Execution is everything.

[Qbicle]

I don't think Title III will have much effect and it's a few years too late. With the amount of flops, frauds and over valuations of some products and tech start ups people are being a little more careful. It's not tech Christmas anymore.

...Ideas are a dime a dozen. Everyone has them and most aren't original. Execution is everything.

Interesting, I'm not trying to start a business from crowdfunding but was just eager to start a discussion seeing as it has begun to trend over the years. I do agree with you that Title III was a bit late, but I think that it will still have an effect in terms of opening the industry to more people. I had a great opportunity last year to have someone talk to my class and me and him discussed the effects on different scales of businesses.

He essentially wasn't to worried about the passing of Title III for VC's since he thought that the additional value that VC's brought along such as networking with investors, guidance, etc. is really what is what allows those few companies to succeed and most CEO's know that. Of course he is going to be a bit biased as he is a VC haha.

Seeing as both of you have invested in crowdfunded projects, what makes you decide to put your money into something besides just the idea being super unique?

[Paul]

The new equity crowdfunding still requires compliance with SEC and State regs especially if the company has a chance to create a public exit. The major change is that now companies may solicit through the internet. Previously you could NOT solicit funding publicly, only from people the company had direct contact with.

Also, the last part of the new regs allows small amounts of investment from non-accredited investors. Previously investors needed to have minimum net worth and
income. Those regs were meant to protect the inexperienced innocents from the hustles.

However, those regs perpetuated the concept of the “rich get richer” because only the rich could invest in risky high stakes companies and the regular folks had no access to those types of deals.

Both Vangogh and Harold are correct in their comments. Crowdfunding is a new tool, not a magic bullet. You still need a viable business concept, management and all else that goes with a business. You also need a “crowd” to target.

There are many many crowdfunding sites popping up. Some are just lousy post up any old project types, while a few are quite sophisticated and serious with legitimate investor followings and review and approval procedures.

We have been doing this kind of work for many years the “old fashion” way and are about to launch a crowdfunding service for our clients. We have been researching some of the equity funding sites and have identified one we think is one of the most legitimate and transparent to become associated with. To be sure it is a new way to reach potential investors BUT it is NOT a shortcut for anything. We still have to do everything we always did and even a bit more.

The OP asked about if it changes relationships with VCs as mentors and networking. Not really, there are always investors that can serve as mentors, add value with contacts and networking etc The only real difference is that investors, VC and others, will be more identifiable through some of these sites. Oddly, many real VCs keep a low profile and only look at deals brought to them by known parties. Otherwise they’d be smothered in “deals”.

Like Harold said there has been plenty of frauds and flops and that is sure to continue for awhile. Eventually the newbies will learn their lessons about investing. It reminds me of way back when online trading started. Everybody was investing in anything and everyone thought they were a market analyst. Then of course came the day traders….well I digress. Point is I think it will shake out for the benefit of the most legitimate and reliable participants in the long run.

[vangogh]

what makes you decide to put your money into something besides just the idea being super unique?

Because I was already very familiar with the people. In every case it was someone who's site I regularly follow and I trusted the people behind the site. Each was just selling something through Kickstarter and I purchased it mainly because the sites in question had already given me free information over the years. In each case I wanted to support people who had already given something to me and because I was interested in the product they were selling.

I wouldn't support something because it was unique. I'd only support a project because I had some kind of long term familiarity with the people behind the project.

[chris maxwell]

I have found crowd funding to be we for niche projects, it depends on which site you are on and what industry you are in, from my experience.

[Harold Mansfield]

Seeing as both of you have invested in crowdfunded projects, what makes you decide to put your money into something besides just the idea being super unique?

Pretty simple. I wanted the product. Funny, I know I gave money to a few but I can only remember one app that was actually pretty good once they finally launched it, and one sort of switching device that I never got.

[Qbicle]

So with Kickstarter and Indiegogo, they are mostly for launching new products or even just getting the product development but they tend to ignore / under represent companies that are already established and have a product in market. Do you think there is going to be a move from crowdfunding to serve that market?

[Harold Mansfield]

So with Kickstarter and Indiegogo, they are mostly for launching new products or even just getting the product development but they tend to ignore / under represent companies that are already established and have a product in market. Do you think there is going to be a move from crowdfunding to serve that market?

You mean to raise funds for new products, or to sell products?

[Qbicle]

To help with companies that have existing products

[Harold Mansfield]

To help with companies that have existing products

It may work if you're offering supporters the product itself. I don't think it will work as a way to raise funds. That sounds more like you need a loan or an investor.
If you have an existing product, it sounds more like you need sales. Not fundraising.

[Qbicle]

Interesting, are there any other methods of crowdfunding that you guys might pop up in the future?

[Harold Mansfield]

Interesting, are there any other methods of crowdfunding that you guys might pop up in the future?

If I could predict the future I'd be wealthy by now. Who knows? But I do think it's more likely to settle in on some default standards, with the (platform) winners at the top at this point, than it is to grow in a bunch of different directions. I think it's already done that.

[Harold Mansfield]

Here's 2 good articles about Crowdfunding that are worth reading:


This 'Smart Wallet' Found Success on Kickstarter and Indiegogo. So Why Didn't It Deliver? (http://www.entrepreneur.com/article/269726)

Nearly 1 in 10 Kickstarter Projects Fails to Deliver Rewards (http://www.entrepreneur.com/article/253649)

[Qbicle]

Definitely interesting reads, I like how they are focused on how crowdfunding is sometimes risky as an investor and a business. It really is becoming it's own industry with several main businesses who have a large share of the markets.

[Owen]

It's here to stay tbh. People are always looking to get rich quick and Kickstarter is the best way to do so.

[Harold Mansfield]

It's here to stay tbh. People are always looking to get rich quick and Kickstarter is the best way to do so.
No, creating something of value that is scalable, or having specialized knowledge in a lucrative field is how you create success. There is no such thing as get rich quick no matter how many people keep trying to do it with shortcuts. At least not legally.

Kickstarter is for crowdfunding projects. Not getting rich quick. Those who have tried to use it that way always end up in trouble.

[Owen]

No, creating something of value that is scalable, or having specialized knowledge in a lucrative field is how you create success. There is no such thing as get rich quick no matter how many people keep trying to do it with shortcuts. At least not legally.

Kickstarter is for crowdfunding projects. Not getting rich quick. Those who have tried to use it that way always end up in trouble.

Congrats on 8000 posts.

It can be used to "get rich quick". What about those guys that make a Kickstarter campaign and then fail due to "financial reasons". I have heard they just scam you and move to another country with hundreds of thousands of dollars, even millions.

[Paul]

Congrats on 8000 posts.

It can be used to "get rich quick". What about those guys that make a Kickstarter campaign and then fail due to "financial reasons". I have heard they just scam you and move to another country with hundreds of thousands of dollars, even millions.

That's not new! That has been happening for a long long time before crowdfunding. Goes way back to bogus gold mines, oil wells, pyramids and ponzis. More recent history the "dot.coms". It is what all the SEC solicitation and accreditation regs are all about. Check out the movie "wolf of wall street".

[Harold Mansfield]

It can be used to "get rich quick". What about those guys that make a Kickstarter campaign and then fail due to "financial reasons". I have heard they just scam you and move to another country with hundreds of thousands of dollars, even millions.
Grifters and scamming people out of money aren't new. Also, be careful believing everything you "hear". The phrase "I heard" has sent many people down the rabbit hole of fantasy and make believe.

[Qbicle]

<link removed>

Any one have any thoughts or experience with this platform and their model?

[Harold Mansfield]

<link removed>

Any one have any thoughts or experience with this platform and their model?

Never heard of it. Just looks like another clone. Is this your website?

[Fulcrum]

Edit: Post no longer required as link was removed.

[vangogh]

Is this your website?

Yes it was, which is why the links are no longer present.


Congrats on 8000 posts

I laugh at Harold's 8000+ and counting posts. Mwahahaha.

[Shortgirl]

Have you ever considered gift crowdfunding? I know it has worked really well for companies such as Attollo Lingerie, they crowdfunded on Kickstarter using this method.