We think crowdfunding is new but it is actually quite old. For example, France donated the Statue of Liberty for America, minus the pedestal. The US Government was not sure it would fund the pedestal, so a concerned citizen put out a call to action through the New York Times to fund the pedestal from thousands of people over 5 years. The average contribution was just $0.89.
Danae Ringelmann started producing one night events with the objective of showcasing projects to investors. However, at the end of the events, the investors would invariably say the projects did not meet their objectives, even though they enjoyed the events. At this point, Danae set upon the path of democratizing crowd funding.
Early on, Danae realized that it was too much to fight the SEC over equity laws at the same time as figuring out the technical platform of crowdfunding. The focus became sovling the mechanics, and in the process, they figured out a legal way to raise money for projects from non-accredited individuals. One of the precepts was to get out of the way of people across the world who has ideas. There is no application process and no ideas get rejected; the platform is democratic and meritocratic.
Today, indiegogo announces a number of internationalization features, including:
- Currencies: Euros, Pound, Canadian Dollars
- Language: French and German
- Localization: New search and discovery experiences for British, French, German, and Canadian users
Crowdfunding is becoming “more” legal as far as investments are concerned in the US. Equity crowdfunding got a big boost from the Jobs Act, supported by the current White House administration. The same risks that apply to equity already apply to perk-based crowdfunding, so many of the issues are the same and have been addressed.
Fraud will always be a problem, since there are always people who attempt to use your system in ways that were not intended. However, fraud can be minimized. Also, crowdfunding is not shopping, it’s funding. It’s the process of taking that does not exist into existence, and that process includes elements of risk. These risks must be communicated and be clear to all parties involved.
Venture Capitalists tend to be very supportive of crowdfunding, because it is serving as an incredible incubation platform that is becoming an integral part of the startup ecosystem. Many times VCs love a project but need reassurances that the market actually want the project; crowdfunding provides market validation. Crowdfunding also allow entrepreneurs to find new customer segments. For instance, for a portable brainwave scanner, neurologists were not the only potential customers. Also, parents of babies with neurological disorders were interested.