The Equity of the Crowds

As Equity-Based Crowdfunding Heats Up, Hedgeable Promises Free Platform

Online investment advisor promises more risk management tools.
 As Equity Based Crowdfunding Heats Up, Hedgeable Promises Free Platform

Mr. Kane. (Quora)

We’ve discussed before how the JOBS Act will allow anyone–including people who are not accredited investment professionals–to put money into startups via crowdfunding. It’ll be nine months before the SEC releases the final rules, but that doesn’t mean the sector is standing still. Today another player jumped into the fray: Online investment management service Hedgeable has announced that in early 2013, it will launch its own crowdfunding platform–and it’ll be free of charge.

A statement released today promises:

Hedgeable will have the only platform that will charge nothing for companies to list, nothing for buyers to buy, and will make no money on transactions, regardless of how SEC defines the role of similar platforms, beginning in 2013.

In a phone conversation with Betabeat, Hedgeable CEO Mike Kane stressed that the business model forces dedicated equity-based crowdfunding sites to charge some sort of fee. Kickstarter (which is simply crowdfunding and involves no equity, but offers an instructive example) currently takes 5 percent from every successful project’s total funds raised. Hedgeable, on the other hand, doesn’t have to make money off the platform, nor is that part of the plan. It’s an offering complementary to the rest of the business, a technology-based investment management firm with a freemium business model. “We already offer retirement investments, people’s IRAs, 401(k)s, so this is just another piece of the puzzle,” he explained.

Mr. Kane also pointed out that Hedgeable is well-positioned to be up and running soon after the final rules are released, because the company is already registered with the SEC as an advisor. In fact, he explained, “we could offer this now to just accredited investors. There’s a few companies that do that.” But they’re rather wait.

It’s the fact they’re geared to portfolio management that differentiates Hedgeable from other would-be crowdfunders. Mr. Kane told us, “There’s going to be a lot of unsophisticated platforms that get put out there, and it’s going to be very dangerous, we believe.” He continued: “There’s going to be no risk management. The buyers’ money probably should be in a retirement account, and they think they’re going to get rich and put it into the next Facebook.” Thanks to the technology platform they’ve built for the rest of the business, Hedgeable can offer features like risk comparison and the ability to hedge investments.

“There’s going to be a lot of people who get into this space but they’re not going to have the prerequistes — due diligence, risk management. We’re already a sophisticated investment platform. It makes a lot more sense for someone to come on our platform, plus we’re not going to charge them for it,” Mr. Kane said.

Hedgeable is currently soliciting interest from both investors and companies seeking funding. They hope to reach 2,000 of each in time to launch as soon as the SEC gives the go-ahead.

Follow Kelly Faircloth on Twitter or via RSS. kfaircloth@observer.com