Crowdfunding is a modern approach to the process of raising capital. In this model, individuals, businesses and organizations seek donations from a large pool of backers (the “crowd”). Successful crowdfunding initiatives have financed everything from political campaigns to movies and start up companies.
Crowdfunding is typically made possible by a web platform. Kickstarter.com is the largest crowdfunding platform for creative endeavors. There have been several successful Kickstarter campaigns funded locally in Asheville including: Asheville Free Media, Appalatch, and Asheville Tango Orchestra.
Despite the fact that website-based crowdfunding first appeared only about a decade ago, the industry has grown to be a powerful economic force. Crowdfunding research firm, Massolution put out a report showing the industry raised $2.7 billion in 2012, across more than 1 million individual campaigns globally. They project that figure will grow to $5.1 billion in 2013.
In reaction to the increasingly widespread use of crowdfunding platforms, the U.S. government enacted regulations designed to protect investors. The JOBS Act (Jumpstart Our Business Startups Act) limits the amount of securities that an issuer can offer to $1,000,000 over 12 months. There are also limits on how individuals can invest through crowdfunding. These limits are dependent on the investor’s net worth and income, but generally are $100,000 over 12 months. There are also other regulations that are in the process of being implemented during the later part of 2014. You should consult a local attorney to understand the regulations around crowdfunding before either initiating or investing in large projects.
Addendum: For more information see article in Capitial at Play, "Secrets of CrowdFunding" .
Clement Law Firm, Asheville, NC -- www.eclementlaw.com -- 828-281-8160