Crowdfunding: How “The JOBS Act” Works For Blogs Success
I went on a trip to mentor kids. I truly love being around the young. Some older people would say, being around the youth keeps you young. For me, I just enjoy the time to understand their perspective on things. Its an opportunity to not be be dogmatic in my life approach.
On this trip I happened to run into young man whom had a big dream. He didn’t want to be just and entrepreneur, he wanted to be a venture capitalist. In terms of concept and values, most kids were focused on Ipod music, the latest Ipad game idea or just having fun. This young man wanted to be a venture capitalist which again 95% of his friends couldn’t even define. My initial, thought was “he has no idea what he is talking about.” Then a scripture dawned on me.
“For as he thinketh in his heart, so is he: Eat and drink, saith he to thee: but his heart is not with thee.”
I realized that this young man thought about this in he heart. While his friends wanted food and fun, his heart was in business. Every campus we went to, the other kids looked at the students, the campus, fraternities or the food. This young man called his dad former busines partner to see how they could do a colaboration to get business from the university because clearly they had a need he could help meet. This young man discussed how his company dad’s company partnered with bigger organizations to get strengthened representation at the table when they negotiated with larger firms or government entities. This young man spoke of patent law and how many patents his dad company had and would continue to have giving them an edge again competition. They young man had so many legs up on the other in terms of starting a business. But the business this young man wanted to start was to be a venture capitalist. Mitt Romney and Bain Capital have made venture capital popular this year. But I hold it true, to do it well you should know someone that has done in some what what you want to do. I asked if this young man knew any venture capitalist, to which he replied “No”. That led me to see how I could help. My challenge is, I don’t know any venture capitalist either.
Crowdfunding: How “The JOBS Act” Works For Blogs Success… What is it?
The irony is, I’ve been looking for venture capitalist. I have been looking in a way different from the original concept of venture capital. For blogs, venture capital is a unique idea . Most venture capital seeks a level of control that most people are not willing to give up in business.
I worked for a company that was standard venture capital funded. The venture capital business was given shares of the company and a controlling interest in the start-up b
usiness. The venture capital business had rounds of funding based upon consistent continued performance measures outlined by the board. Upon the performance improvement of the company or growth, we sawmore capital from the venture capital business. In this case, the venture capital funded the business in trenches which eventually gave it a controlling interest in the eventually public company. At the start up business eventually was taken over by the venture capital business. The CEO and founder was kicked out and the Venture capital company placed a temporary CEO in place to manage the company assets as it liquidated the company like a chop shop does a car for parts. I am not saying that is how all VC companies do. But I am saying the company did operate that way with this particular start up business.
The new crowdfunding version of venture capital, is set up where the individual start up business has a bit more control. Here are quick details on 4 of the top crowd funding sources:
- Kickstarter: A haven for emerging artists, kickstarter is fast becoming a platform for entrepreneurs to finance innovative new products. It is an all of nothing funding platform where if you do not reach your funding goal, you do not get any of the funding. The site has seen more than 13,000 successful campaigns since its launch in 2009
- Indiegogo: This is a free spirited free thinking concept with few limitations. This platform allows you to get funding even if you do not reach your goals. The fee is 4% if you reach your goal but 9% if you do not reach your goal.
- Microventures: The only site of the more popular crowd funding platforms that have more that focuses on bringing larger angel investors to the table to smaller ideas. This crowdfunding platform is more investment bank oriented than the other creative version. However, they have on average funded $150,000 in comparison to some other other crowdfunding platforms which fund an average of $5,000.
- Profounder: This is pretty straight forward idea with a clear approach to crowdfunding. This project focuses on federal regulation and the approach to offering investment options to those whom you have a current relationship with before making the offer. This is very simple process to put together for those whom have a desire to keep funding concise.
Crowdfunding: How “The JOBS Act” Works For Blogs Success… How Can I do it?
Now, I’m aware of Kickstarter, IndiGogo, Microventures, and Profunder but by no means is this an asserted or implied a partnership, sponsorship or endorsement with any crowd funding company. I personally love the idea, but I have not worked with any of these companies. I do however see that each has a set of requirements specific to them that makes their crowd funding work best for their unique market.
What has changed recently is the bill signed by President Obama that is focus on helping promote jobs in America. The new legislation has brought from small niche crowdfunding conversation into main stream topics for blogs . In recent times, blogs had considered crowd funding only in cases of:
- artist looking to raise capital for creative projects;
- people looking to raise capital for emergencies;
- groups or individuals raising capital to fight life threatening injuries of illnesses
The bill’s “crowdfunding” provision is getting the most attention. The Jobs Act allows entrepreneurs to raise small amounts of capital from large pools of individual investors beyond the original crowdfunding scope. The Internet provides a tool for private citizens to form new marketplaces as social networks evolve to become more than just networks of friends, likes or followers. Web-based platforms such as Kickstarter and profounder allow entrepreneurs to raise up to $1 million annually, as sanctioned by the new legislation.
Crowdfunding: How “The JOBS Act” Works For Blogs Success… Does it really work?
Does this crowdfunding really work? I don’t know yet personally. I went to Johns Hopkins with a good friend. I met people whom paid their hospital bill through crowd funding. In fact, they were not able to get insurance until Obamacare. This crowd funding platform allowed them to pay for the cost of insurance and a hotel to stay near the facility for daily treatment. They raised in 90 day over $10,000 for there challenges. In spite of the hardship, I was blessed to learn of their success in the process.
So my take on crowdfunding is, you must carefully weigh your option before moving forward. Yet, at this point crowd funding is worth at least the effort to your project off the ground.
1. Zouhali-Worrall, Malika “Finance: Buddy, can you spare a C-note? A field guide to crowdfunding”, Inc. The Magazine for Growing Companies, November 2011
2. Wilkinson, Amy M ”Jobs Act a win for startups and economy“ , April 10, 2012