THE EVOLUTION OF CROWDFUNDING
Many are aware of traditional crowdfunding campaigns, where you send money to support an idea that resonates with you. They usually come with some kind of reward or swag. I have participated in several of these projects over the years. In it’s most basic form, giving a friend some money to buy a video game might qualify. I mean, you’ll get to play it, so that’s a nice perk, plus you didn’t have to spend the full amount. Also, I’d like to consider the dozens of stolen CD’s of mine in college might also qualify. OK, that’s a stretch but it makes me feel better. I’ve donated very small amounts of money to breweries over the years. I received T-Shirts and beer discounts and I felt great about contributing toward the cause. I have also contributed towards “The World’s First Social Robot.” That didn’t go like we thought.
The truth is we all want to be part of something that is cool and innovative and crowdfunding gives you the chance to do that without all the heavy lifting of actually managing the business or stressing about ROI. The other side of that coin is the simple fact that my gift to these companies, in the form of crowdfunded money, has never returned me any investment beyond that warm fuzzy feeling. Now it can be hard to get warm fuzzy feelings today. Let’s not discount that experience. And that is why crowdfunding has been so popular. But like everything else, it has evolved. There are now options to invest in Mani Street “en masse.”
In 2016 Congress passed the JOBS Act. Among other things, the JOBS Act allowed small businesses the opportunity to seek outside investors without all the administrative burdens of an initial public offering, or IPO. With the passing of this Federal legislation, Virginia passed companion legislation in 2017 Called the Virginia ICE, or Intrastate Crowdfunding Exemption. Businesses that operate in Virginia and are engaging only Virginia residents, can take advantage of the ICE application to offer sale of securities (stock) to the public. While if we proceed with this path we will be one of the first companies to apply this exemption, it is more common in other states and nationally there are intermediaries that manage the exchange of money and securities. We believe that this type of investing is interesting for the following reasons:
- Small businesses are said to be the backbone of the country and the economy but investing in them has been difficult if not impossible up until now.
- Many feel that Wall Street needs a balance to ensure the best interest of the country and its citizens is a factor in their processes. Equity crowdfunding could provide that balance.
- While traditional crowdfunding allows for that warm fuzzy feeling and some possible perks, a well designed equity crowdfunding program not only provides good swag for investors, but long term business equity interest as well.