Caveat Investor

Amateur Hour: New Crowdinvesting Rules Mean Everyone Can Play Venture Capitalist

(Photo: James Cridland via Flickr)

It was glaringly sunny in Washington, D.C., on April 5, the day President Barack Obama signed the JOBS Act, and there was some confusion as to the location of the afterparty. One faction of Rose Garden attendees gathered on the roof of the W Hotel and wondered where everyone was. The rest assembled at Off The Record, a dimly lit bar in the basement of the Hay-Adams Hotel, and kicked things off with an icebreaker.

About 30 smartly dressed men and women, still sweating out the adrenaline of being three rows away from the president, stood in a circle. Many had worked with each other but never met. Each stated their names, the role they played in the bill, and perhaps a few words about the brave new world of so-called equity-based crowdfunding, which had just been legalized by one of the six constituent laws that make up the JOBS Act. The new rule will allow “ordinary Americans,” in the president’s words, to invest in a nonpublic company in exchange for shares for the first time since the enactment of the securities regulation that followed the 1929 stock market crash.

The mood was triumphant and boozy. Tim Rowe, a Cambridge-based venture capitalist, raised a glass and offered a toast to working together in the future. “The Marine Corps was founded in a bar in Philadelphia,” he said. “Big things can happen starting in a bar.” Attendees signed up to join a trade organization for the newly minted market. “There was the sense of elation that we had cracked the monopoly of Wall Street,” one attendee recalled. Read More

Fresh Capital

Kickstarter Competitor Indiegogo Raises $15 M., Staffing Up in New York

Mr. Rubin. (Photo: Twitter)

Crowdfunding platform Indiegogo just raised $15 million from venture capital investors in order to staff up, build out and take on Kickstarter and 400 other competitors (including one crowdfunding platform that launched after raising money on Indiegogo). “We launched in January 2008 and we’ve been growing pretty steadily,” founder and CEO Slava Rubin told Betabeat from some unspecified location in New York. “We want to improve the product to make it easier and better to have campaign owners get discovered and get more funding.” Read More

The Equity of the Crowds

Congress Could Empower Crowdfunding Sites to Become Proper Mini-Investor Platforms

(flickr.com/kheelcenter)

With 407 votes last week, the U.S. House of Representatives passed a bill (Entrepreneur Access to Capital Act, H.R. 2930), that would allow an SEC exemption for crowdfunding sites, whereby entrepreneurs could raise up to $2 million in exchange for equity from small-time investors.

As it stands, crowdfunding sites like Kickstarter (NYC) and IndieGoGo (NYC and SF) host projects that accept donations with no promise of monetary remuneration. Kickstarter and IndieGoGo investors are paid back in chip clips, early access, memorabilia, and other favors from the project’s creators, sort of like an NPR fundraising drive.  Read More