Crowdfunding for Startups
Posted by: John Tozzi on July 03
I’m fascinated by crowdsourcing and the new business models it enables. Companies have been tapping crowds for product design and customer service for some time now. It’s much trickier to tap the crowd for money, but here are two new startups trying to do just that:
- Nvohk, which has more than 3,000 people who pledged $50 each to have a hand in an eco-friendly clothing company, and
- BeerBankroll, which offers members a chance to help run a brewery.
These companies can’t give the crowd equity without filing with the SEC, so crowdfunded ventures are structured as membership organizations — your $50 gets you into the club, with the agreement that the crowd will vote on business decisions and be rewarded with points (redeemable for products) instead of profits. It’s basically a fan club built around the business.
Other crowdfunding ventures include Swarm of Angels (members fund a movie), and MyFootballClub (in which members bought and manage the British soccer team Ebbsfleet United). And last year we wrote about Sellaband, a site that lets bands crowdfund their recording costs.
So crowdfunding seems feasible for businesses that people are passionate about — bands, movies, sports clubs. Beer and T-shirts could also lend themselves to that kind of fan-based financing. But what about other businesses? Will crowdfunding ever grow beyond the novelty stage to become a mainstream way for startups raise money?
Reader Comments
Jeff
July 18, 2008 05:56 PM
Fascinating concept - I've never heard of it. Is there a ceiling for how much each individual can pledge before before the company has to file with the SEC. I would think people could each pledge thousands of dollars if its similar to joining an elite membership club. At one point would these individual contributions get taxed? Great resources and tips for building a business here... www.readtheanswer.com/index.php?RTA=web2
Brian
September 16, 2008 03:40 AM
Crowdfunding is a popular trend, especially in the entertainment industry. Sites like Sellaband in the music industry or the Band of Angels venture employ the crowdfunding idea.
Another site that does this is IndieGoGo.com. On their site, filmmakers can connect with film lovers and get their films financed and made. Its a great way to increase the quantity of independent films that are made today.
Jaeger
October 17, 2008 06:21 AM
I hear here's this site that's trying to do something similar with property investments --> cheggit @ www.everyonesharesit.com
KK
December 3, 2008 05:36 PM
Help ! I am creative but not business savy ! Someone HELP me through the steps in crowdsourcing-funding PLEASE ! Thanks KK
Dawnea Adams
February 23, 2009 08:06 PM
I am partner in a jewelry design business...Aphrodite Jewelry. The artist is amazingly talented...constantly reinventing her designs and the line is thriving with a minimal amount of stores/clients despite the economy but it is time to take it to the next level. We are looking for an investor/investor's...
please advise...
CouchTycoon
June 23, 2009 08:31 AM
if you like crowdfunding, you maybe want to cover us too :)
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What's it like to run your own company today? Entrepreneurs face multiple hurdles new and old, from raising capital and managing employees to keeping up with technology and competing in a global marketplace. The writers and editors from the Small Business team, Amy Barrett, Amy S. Choi, Colleen DeBaise, Nick Leiber, Stacy Perman, Jeremy Quittner, John Tozzi, and Kimberly Weisul, discuss the news, trends, and ideas that matter to small business owners.
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