A strong crowdfunding industry will benefit all of us – entrepreneurs raising money, citizens building better communities, domain experts looking for jobs and service providers looking for customers.
Based on almost 25 years of experience working in advertising, PR, and publishing business, I have identified these 10 initiatives that will help this happen. These are the changes that we need to make to build a successful crowdfunding industry.
1. Utilizing Social Graphs – Implementing social graph application programming interfaces (APIs) for crowdfunding platforms will make it easy to see friends of friends who are investing in crowdfunding campaigns due to popular social media networks such as Facebook, Google+, Linkedin, Meetup, Pinterest, Twitter, YouTube and others. Data mining and big data services will become very sophisticated services for the crowdfunding industry. Once these services get started it will be very hard for fraudulent companies to succeed because they will vetted by millions of investors working together to form a policing crowd.
2. Predicting the Success of Crowdfunding Campaigns – Investment professionals will develop crowdfunding campaign evaluation systems that break down campaigns into easy to evaluate modules similar to the way the crowd of fantasy football gurus rate individual players based on their performance. Utilizing a crowd to rate crowdfunding deals by various categories will make it easy and simple for large number of non-investment professionals to vet deals together.
3. Growing an Industry Crowdfunding Service Providers (CSPs) – In order to help 229 million new investors vet deals the crowdfunding industry is going to spawn a tremendous amount of new CSPs that will help novice and accredited investors examine equity investment deals to determine potential success or failure. To date our database includes CSPs that provide white label crowdfunding platforms, payment processing, SEC compliance, digital signatures, legal documents, intellectual property (IP), valuation calculators, investment scoring, due diligence, social trust, business planning, marketing, PR and social media and marketing companies.
4. Rising Stars of Crowdfunding Content – The demand for crowdfunding TV programs will grow exponentially to provide content similar to the Shark Tank, but without the bite. Whereas reality TV shows currently feature drama that bashes unprepared entrepreneurs, the American public will be drawn to programming that educates startups on how to launch successful crowdfunding campaigns, build vertical business-to-business crowdfunding platforms as well as how to vet and invest in Crowdfunding equity investment opportunities.
5.Creating Economic Development Centers – For the past 10 years banks have denied small businesses access to startup capital. In a town of 50,000 families, equity crowdfunding will allow each family to invest up to $2,000 per year into local businesses the community needs and wants. This will create an investment pool of $100 million dollars each year that will not only create lots of jobs, but allow everyone in the community to encourage, steer and participate in the prosperity of the community. Investing locally as a crowd will make it easy to vet and assess cooperative crowdfunding deals for the social good of the community.
6.Transforming Rural America into Corporations – Access to large pools of investment capital will allow crowdfunding to turn kitchen tables everywhere into the board rooms of tomorrow. Outside of the top 300 largest cities in the United States, rural towns and cities will suddenly have access millions of micro venture capitalists and hobby investors. Local investors will be able to crowdfund movie theaters, bowling alleys, restaurants, well-known franchises, and other types of in-demand businesses that will become economic development engines.
7.Increasing Success via Target Marketing – Do crowdfunding platforms like Kickstarter and Indiegogo stand a chance against large media companies such as Condé Nast, Hearst, IDC, Meredith, Reeds, Time Inc., Ziff Davis, etc.? Right now the practice of target marketing via crowdfunding platforms is non-existent. Well-established publishing and ecommerce centers are perfectly positioned to launch business-to-business crowdfunding platforms that will make fundraising easier for crowdfunding campaign managers that want to launch highly targeted advertising, email, PR and social media campaigns to make their crowdfunding campaigns very successful. This will significantly improve the success rate of traditional crowdfunding platforms and allow them to outperform the current market leaders Kickstarter and Indiegogo.
8.Reducing Risk for Venture Capitalists – Hobby investing will become a national past time and VCs will not have to risk giving seed money, thus the quality of their deal flow should improve dramatically. Instead of risking several million dollars to provide seed startup capital, VCs will be able to sit back and wait to see what products/services the crowd is willing to support with their hard-earned dollars, and as a result should be able to use crowdfunding as a very good measurement of future marketplace demand.
9.Growing a Crop of Hobby Investors – When Title III crowdfunding becomes legal 97% more Americans will be able to invest up to $2,000 per year in equity crowdfunding opportunities. If every family in the U.S. investments just 1% of their annual income in local crowdfunding deals it will provide over $300 billion per year to help small businesses get off the ground. It will dwarf by a significant magnitude the environment that was prevalent during 1990s when venture capital extremely easy raise by simply drawing up a business plan on a napkin. Shopping crowdfunding campaigns will become a national past time.
10.Legalizing Title III Equity Crowdfunding – Title III Crowdfunding should become legal by June 2014. Not a new topic, but one worth revisiting on a state-by-state basis as each state passes their own local laws regarding crowdfunding due to the fact that the SEC has been very slow in adopting the mandates that were passed by the U.S. Congress and the President Obama in April of 2012 when the JOBS Act was signed into law. Crowdfunding is so important that Georgia, Kansas, Michigan and North Carolina have bypassed the SEC and implemented their own crowdfunding legislation.
By Robert Hoskins