As a consultant, I am frequently approached by entrepreneurs and start-up companies seeking investment money. I have had to tell them that in most cases, initial money comes from family, friends and credit cards. Once they have established that they have a workable business model they can turn to Angel and Venture Capital investors. The latter form of investment money is hard to find and can be a negative if the company takes off as you may have partners you wish you didn’t have.
It was for that reason that I was delighted when I saw that Congress had passed the JOBS Act. Under the new JOBS Act (click here for our webinar on this subject), entrepreneurs will be able raise capital through crowdfunding sites. The question is; how do you find a crowdfunding site? CNN has one answer in a great piece entitled “8 crowdfunding sites to watch.”
Just to review, Congress has passed the JOBS Act which will allow, for the first time, companies and individuals to find investors via the Internet. Here is how Wikipedia defines it:
Crowd funding or crowdfunding (alternately crowd financing, equity crowdfunding, or hyper funding) describes the collective cooperation, attention and trust by people who network and pool their money and other resources together, usually via the Internet, to support efforts initiated by other people or organizations.
There are websites in place that do a form of crowdfunding, Kickstarter is probably the most well-known. The difference is that sites like Kickstarter are seeking contributors and not investors.
Currently, and until the JOBS Act goes into effect, it is not possible to seek investors but you can seek contributors. Those who give money are doing so in the same way that one might give to PBS. If you are a contributor, you may get a tote bag but you won’t get ownership in the network.
Global Toy News and Global Toy Experts will be producing a seminar on the subject (click here for more information) in conjunction with Tom France of the Venable law firm in Washington DC. In the meantime, we will be covering various aspects of crowd sourcing and the JOBS Act in blog postings.
In my next blog, I will begin listing what CNN deems to be “8 crowdfunding sites to watch.”