Posted on

Danae Ringelmann: Crowdfunding Unleashes A Different Segment Of The Economy

Crowdfunding: Soon You Can Make Profits (And Losses) Like The Big Boys

Its easy to think of equity crowdfunding as a way for Joe or Jane Investor to get in on the next big tech startup. But we believe it could also unleash a different segment of our economy: the long tail of local small businesses and franchises that are too small for pro investors to spend time on. We see indications of this on Indiegogo already. The amount of money pledged to small business campaigns on our perks-based platform has risen by more than 200% over the past year, and has helped restaurants, boutiques, massage parlors, theaters, gyms, bookstores, hobby businesses, and more. (Campaignersare charged a 4% fee of the total amount raised if the target is met, and 9% of the total amount if the target is not met. ) Read what other mentors say about crowdfunding. Even the smartest and most hooked-in investment professionals strike out with most of the startups in their portfolios.But capitalizing a public-facing business through crowdfunding has the potential to lower investment risk for both issuer and investor because crowd patronage offers market validation and loyalty advantages that traditional funding mechanisms cant provide. We see that perks-based funding already generates strong loyalties, and by adding financial ownership to emotional ownership, crowd investing might amplify these effects.

Can crowdfunding help medical research?

In the wake of the horror stories of the 1920s, protecting the small investor from themselves made sense and was an important part of the Securities Act of 1933. This was achieved, firstly by requiring companies that were offering shares to the general public to register and disclose pertinent information, and secondly by restricting who could invest in companies before that transparent process came into play. Accredited investors were those deemed wealthy or wise enough to take the risk of investing in startups. The qualifications have been amended multiple times over the years, but basically it meant those deemed wealthy enough to survive a bad investment or wise enough to spot one.

Love Powerball? Try Crowdfunding

The average kickstarter pledge is $71.41. So even if you limit your consideration of kickstarter to those who actually make pledges through the site, youve got much less money at risk here, per person, than in the lottery. Meanwhile, despite the fact that virtually everyone, rich or poor, loses money on the lottery, most states enthusiastically support their lotteries. They don’t put up barriers to make it harder to play. And lottery players certainly dont have to show that they understand the risks or that they have money to burn: in most states, they just have to be 18. This isnt to say that we should outlaw the lottery or that we should eliminate all regulations on crowdfunding. But crowdfunding doesnt need to be nearly as scary as were making it out to be. Its already underway in Great Britain, where investors actually get a generous series of tax breaks in return for taking a risk and helping to encourage entrepreneurship.

Czarnota and a group of doctors and researchers from Sunnybrook, Ryerson and MaRS Innovation are hoping crowdfunding is the solution. There are just eight days left of the two-month-long campaign to raise more than half of the $96,987 needed to launch an additional trial. The goal is to eventually raise a total of $687,950 to launch trials at three world-leading cancer centres: the MD Anderson Cancer Center in Texas, London Health Sciences Centre in London, Ont. and Princess Margaret Hospital in Toronto.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s