Looking at the new crowdfunders and the JOBS Act

April 30, 2012

The crowdsourcing site Kickstarter just turned three years old, and the New York Times has a nice profile that explores how the company has evolved and how its changed the way entrepreneurs, artists, and anyone else with an idea can raise capital online.

Much as the introduction of cheap Web services lowered the barrier to entry for people seeking to create a start-up, and as offshore manufacturing gave entrepreneurs a chance to make products without having to build a factory, Kickstarter offers budding entrepreneurs a way to float ideas and see if there’s a market for them before they trade ownership of their company for money from venture capitalists.

Tapping into the wisdom of the crowd is nothing new. And now that Kickstarter has beaten the path, there are a few similar, and niche-focused, alternatives to Kickstarter. One interesting development to consider, though, when thinking about the online fundraising space, is the Jumpstart Our Business Startups Act, also known as the JOBS Act. As Talking Points Memo reports:

Kickstarter and other crowdfunding websites are also facing something of a watershed moment in the wake of passage of new bipartisan legislation, the JOBS Act, that would specifically allow for private startup companies to solicit investors with stock options offered online, something previously not allowed under Securities and Exchange Commission regulations.

One of those companies that hopes to capitalize on this new opportunity is Return on Change, which recently launched. The mission, according to their website, “is to provide an online medium by which start-up companies and bright entrepreneurs will be able to pool capital through crowdsourcing, while creating a community of advice and collaboration.”

Understandably, opening up crowdsourced investing opportunities online has some concerned. The SEC is still figuring out how to implement the JOBS ACT, but once the details are finalized we can expect to see even more companies like Kickstarter and Return on Change, maybe even a crowdfunding startup that is ITSELF crowdfunded.

Image: REUTERS/Kacper Pempel

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