If you're considering crowdfunding a capital raise, here are 10 things to keep in mind.
It’s October 2018. By now, most everybody knows or should know what it means to crowdfund an idea. By its own account, Indiegogo has launched over 800,000 ideas through a network of over 9 million users throughout 235 countries. And that’s just one platform.
As we’ve written before, there’s a difference between donation-based, or ‘rewards’ crowdfunding, and securities-based crowdfunding. With donation-based crowdfunding, you may be able to launch a new company or new product line by more or less enticing donors through promises of first distribution; to early adopters, nothing is sexier. With securities-based crowdfunding, you look to scale your company through debt or equity transactions offered through similar mechanisms as donor funding, but with additional strings attached.
As entrepreneur-attorneys who have lived the valley-of-death experience, we love the reformed securities laws and the technological advances that encourage greater funding potential for more small businesses. Notwithstanding, we can’t stress enough that securities-based crowdfunding should be pursued patiently and with sound counsel. The Securities and Exchange Commission (SEC) offers a number of investor-facing guidelines for responsible crowdfunding investing.