Thursday, May 7, 2015

2015 - The Year of Investment Crowdfunding

Joan Siefert Rose, President of the Council for Entrepreneurial Development (CED) in Durham, reports from the Angel Capital Association Summit meeting in San Diego on the growing importance of investment crowdfunding as a funding source for startups and small businesses nationwide.
Joan Siefert Rose

"I’m just back from the Angel Capital Association (ACA) Summit in San Diego, where much of the talk among the 600-plus attendees was about how crowdfunding is changing the relationship between entrepreneurs and traditional equity investors. The general consensus is that crowdfunding options will continue to expand at a rapid rate, especially as changing federal regulations open up the playing field to new investors.

Whether this is a good thing depends on whom you ask—many see crowdfunding as an essential way to democratize participation of funding early-stage companies and accelerate the pace of startups; others worry that new investors are unsophisticated and not prepared to lose money in high-risk ventures. But everyone agrees that equity crowdfunding is here to stay, and it’s up to entrepreneurs and angels to educate themselves. 
That’s where CED comes in, as we are committed to engaging with and helping to educate the growing pool of investors who are able to support the entrepreneurial economy."
Joan's post includes some interesting updates on the growth of the crowdfunding industry.
"In fact, of all the types of online platforms that allow individuals to direct dollars to private companies, equity crowdfunding is—for now—a relatively small, but growing player. Numbers are hard to come by, but the ACA estimates that roughly $7 billion in transactions took place on North American crowdfunding platforms in 2014. Equity crowdfunding, in which investors get an ownership stake in the company, accounted for about $300 million of that total. By contrast, platforms that allow individuals to lend directly to each other, like LendingClub and Prosper, are currently the heavyweight champions, with $5 billion worth of activity. Donation- and rewards-based sites like Kickstarter and Indiegogo, also brought in more dollars for startups than equity platforms."

You can read Joan's full report here on ExitEvent.

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