Crowdfunding, the New VC Funding

The notion of crowdfunding has actually existed for centuries as crowds gathered to hear and support pitches, but digital technology and social media have catapulted that notion to new heights and expanded the playing field and the playbook.

When President Obama signed the April 5th legislation, "Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure Act" a.k.a. the Crowdfund Act, as part of his JOBS (Jumpstart Our Businesses and Startups) Act, the general public became empowered to fund startups and small businesses and receive stock (equity) in exchange, as well as legalized 'general solicitation,' which means that startups and companies can leverage social media like FaceBook and LinkedIn to raise funds.

Kickstarter’s modus operandi of crowdfunding individual projects has iterated to the next level of VC-like funding, which prior to the President’s action, could only be donation-based — making it illegal in the U.S. for a company to raise money from a crowd that would then grow the business.Continue reading...