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Crowdfunding is changing the way entrepreneurs fund their small businesses. Numerous crowdfunding sites are active, raising nearly $1.5 billion in 2011. But Internet fundraising could really explode once the Jumpstart Our Business Startups (JOBS) Act takes effect. Check out some leading websites below.
Kickstarter (Kickstarter.com): The granddaddy of crowdfunding sites and the go-to location for creatives with more ambition and talent than money. Kickstarter (which collects a 5 percent fee) is an all-or-nothing site, meaning that if funding falls short, investors keep their money. Slightly less than half of all projects are funded.
EarlyShares (EarlyShares.com): This site, launched in 2011, likes ambitious entertainment projects and partners with—among others—reality TV producer Five by Five Media (Fashion Star, The Hero). The company wants to be a player in feature films, too, providing last-mile funding for major Hollywood budgets. EarlyShares is ready to go when the JOBS Act kicks in: The website has 75,000 potential equity investors lined up and 2,300 companies see it as an opportunity. EarlyShares plans a 6 to 9 percent fee, depending on the amount of money sought.
Crowdfunder (Crowdfunder.com): Poised to be a big name with a heavyweight team in place, this business crowdfunding platform has partnered with Gate Global Impact to offer shareholding opportunities to investors later this year. Crowdfunder’s portfolio also will include debt offerings, which don’t offer ownership but, like loans, provide the assurance of repayment with interest on a schedule. Crowdfunder might have an inside track for success under the new law because advisory board member Sherwood Neiss co-authored the JOBS Act’s crowdfunding framework. There are no registration fees while the site is in beta, which could end once the JOBS Act takes effect.
Kapipal (Kapipal.com): Kapipal’s staff created a manifesto on how crowdfunding should work. So far, this easy-to-use service has no fees, and it’s a good place to start if you’re intrigued by this form of fundraising. Kapipal is for folks with modest dreams—like $500 to help fund a wedding, but it can accommodate more ambitious plans, too. “Kapipals” launch a private website and share the URL with family and friends who send money via PayPal. RocketHub (RocketHub.com): RocketHub embraces offbeat projects and has scored notable success with its video series Extra Credits. This is a well-trafficked site with a grassroots focus, an international following and no signing fees. Entrepreneurs keep the money even if funding goals aren’t met.
AngelList (Angel.co): This site is all about connections, putting together high-profile venture investors with eager startups. AngelList is waiting for the JOBS Act regulations and doesn’t offer equity crowdfunding to unaccredited investors yet, but is likely to do so once the law kicks in. It currently has no subscription or membership fees.
Fundable (Fundable.com): Fundable partners with modest startups, and its success stories include an elevation simulator for bicyclists, a project that raised $20,000—double the goal. Investors can pledge as little as $1, as long as they have no bigger reward in mind than a company T-shirt. This all-or-nothing website charges $99 per month during active fundraising. If you meet your goal, you also pay 3.5 percent of the amount raised, which covers credit card processing (Fundable doesn’t take a cut). Fundable CEO Wil Schroter celebrates the freedom that will be offered by the JOBS Act. “People can now publicly say they’re raising money and on what terms,” he told SoCalTech.com.