The current model of crowdfunding has a very promising future. This fact seems to have been lost in the recent excitement over equity crowdfunding. In this post we point out the viable strategies for using both types of crowdfunding, because we create white-label crowdfunding platforms for both.
Depending on which platform you’re on, the current model of crowdfunding serves, variously, as a method for gifts, donations with a tax deduction receipt, donations with perks to the donor, and/or pre-sales of a potential product or service. These methods of fundraising and sales aren’t going anywhere. This is where crowdfunding got its start and it is powerful. Specifically, we see plenty of growth for this type of crowdfunding for projects, ideation, proving-of-concepts, art, non-profit fundraising, short-term businesses, startups with limited exit potential, competitions, and more. In short, all the things our clients are using crowdfunding for now will continue to be viable long into the future.
The advent of equity crowdfunding will likely go into effect in early to mid 2013 and with it will come a whole host of new opportunities and challenges. Right now we’re working with CFIRA on proposed rules from the industry to make sure the SEC and FINRA understand our perspective. Both regulating bodies have signaled their interest in working with the crowdfunding industry as they make rules to govern crowdfunding portals.
Equity crowdfunding will take shape after the dust settles towards the end of this year or early next when we know the SEC and FINRA’s mandated rules. We envision equity crowdfunding portals being used for capital raising by incorporated for-profit C-Corps and Benefit Corps with clear business models or proven concepts, startups with clear exit opportunities, and on some platforms by LLCs and S-Corps. These platforms will likely be hosted by companies who are looking to establish themselves in the industry, willing to take the time to jump through regulatory hurdles and remain compliant, and have a long term business model based off of increased volume. The SEC may move to limit the number of platforms they register, but that remains to be seen.
In short both Crowdfunding & Equity Crowdfunding bring unique opportunities to businesses and organizations. Both models are viable and both are needed to help entrepreneurs and businesses gain access to the capital they need. Launcht is committed to supporting both Crowdfunding & Equity Crowdfunding with custom white label solutions that allow our partners to foster connection and action within their networks.