Crowdfunding – Where are we going with this?
As reported in Dan Primack’s email newsletter Term Sheet this morning, Indiegogo has just closed a BIG Series B:
“Indiegogo, a San Francisco-based crowdfunding platform, has raised $40 million in Series B funding.Institutional Venture Partners and Kleiner Perkins Caufield & Byers co-led the round, and were joined by return backers Insight Venture Partners, MHS Capital, Metamorphic Ventures and ff Venture Capital. www.indiegogo.com“
Big names involved. Meaning big thinkers expect big growth and a big exit. And my guess is that growth isn’t just expected for Indiegogo, it’s expected from crowdfunding as an industry. Which of course includes equity crowdfunding, where instead of getting tickets or t-shirts, funders would get equity in the company. On some level aren’t the VCs betting against themselves here? But I digress.
So this is growth money. Get big and get big fast money. I wonder if it’s meant to edge out Kickstarter as the #1 or if Indiegogo will continue to differentiate itself by being the “go to” for the more artsy, less technical projects?
Last October, my venture funding class worked together to try to get a handle on the crowdfunding space as we investigated the various ways start-ups raise funds. Our conclusions were that crowdfunding is still very much the Wild Wild West in terms that there are few rules, and it’s not exactly clear what everyone’s end-game is.
Clearly, there are a whole gaggle of firms offering Kickstarter look-alikes, but really waiting for the moment when the SEC says go ahead and use crowdfunding to raise equity. But if you take a closer look at what the rules are starting to look like — audited financial statements, responsibility for accrediting investors, etc. — it’s unlikely it’s going to be an early stage equity solution. Which is what I thought the JOBS act was for in the first place??? Here are a few places you can read more about the proposed rules:
I think it’s interesting that the big investment closed prior to the SEC figuring out the equity crowdfunding rules. Does that mean that the investors think Indiegogo is capable of huge returns even if it stays a product for investment company, charging 4% or 9% fees on the amount raised? If these sites use their brands to become equity funding sites down the road, would they take a % of stock in addition to fees? Here are a few more articles I found about Indiegogo and the raise.
Where do you think equity-based crowdfunding is going? Will it be the holy grail of early-stage entrepreneurs, kicking aside the capital gate keepers? Or will it be so over-regulated that only experienced entrepreneurs who already have a network of angels will find it useful? Or something else?