Crowdfunding May Offer Ownership Opportunities

by Ben Jackson 0

People who support companies with on crowd funding sites typically get some kind of reward or thank you gift for their contribution, but until now they have not been able to use this prepaid financing to get a business ownership stake.

“New federal rules will allow the American public to go online and buy shares in startups that up to now hadn’t even been a legal option for all but the richest 3.5 percent of US households, including Silicon Valley venture capitalists like Andreessen.
But the changes made by the Securities and Exchange Commission that open investment opportunities to the masses could also give startup founders a reason to bypass Silicon Valley’s all-powerful venture capital firms.”

Regulatory expenses and investing risks still remain issues. There is also question of whether or not people would take the time to get enough information from a crowdfunding site to make a good assessment of a potential investing opportunity. But an ownership opportunity may provide new avenues of investing for those people who have modest funds to invest, but an understanding of what the risks are.

For those entrepreneurs looking for funds, sites like Kickstarter and Indiegogo provided a way to raise business capital without sharing ownership interest. Those determined to remain independent may find themselves under increasing pressure to share ownership. This pressure might reduce the appeal of a funding avenue that once seemed like a safe haven.

Overview by Ben Jackson, Director, Prepaid Advisory Service at Mercator Advisory Group

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