Time to Startup!

The BizFilings blog covering business tips and trends.

Curious About Crowdfunding?

Published on May 14, 2012

Summary

Read 'Curious About Crowdfunding?' at 'Time to Start Up,' the small business blog by BizFilings.
By Brooke Miller Hall

 

We recently announced the JOBS ACT, signed into law April 5, which will make crowdfunding easier to obtain. Crowdfunding collects money online from multiple donors to support your business or a specific project. Sites like Kickstarter and IndieGoGo have raised millions for entrepreneurs and are becoming an increasingly popular way to fund projects. For example, the film Love for Lust was funded through Kickstarter, exceeding its original $70,000 goal by raising $101,000 from1,519 supporters. Fran Kranz, who worked on the project, said, "I knew what Kickstarter was, but it kind of all blows me away with all the capabilities of the Internet. I just feel like the playing field has been leveled with the Internet.” “There’s no limit to what you can pull off with things like Kickstarter,” Kranz added. While Kickstarter focuses on creative projects, IndieGoGo says it’s for “all types of campaigns” – from supporting a class trip for Costa Rican teenagers to helping hard-luck individuals pay their medical bills. IndieGoGo has a section reserved for entrepreneurial campaigns and a subsection just for small businesses. Some of their small business campaigns include:
  • a Harlem café asking for $10,000 to help fund an expansion
  • $14,500 for the production of arch-supporting flip-flops that are vegan-friendly and dishwasher safe
  • the start-up of a Norfolk donut supply company, which has already exceeded its $5,000 goal
  • $19,000 for a successful online soap company to open a retail store
The JOBS Act will make it easier for small businesses to use these sites by adding the ability to raise up to $1 million annually through crowdfunding without having to follow any SEC registration or filing. Private investors will be able to invest up to $10,000 (or 10 percent of annual income, whichever is less) annually without any SEC filings. The SEC has a grace period of 270 days from the signing of the JOBS Act to implement additional regulations. BizFilings suggests that in the interim, small business owners focus on getting all of their documents in place, including business plans, incorporation documents and financial forecasts. “The changes in legislation can have some great benefits for small businesses by legitimizing these alternative sources of funding,” says Karen Kobelski, executive member of the leadership team at BizFilings. “Before a small business takes advantage of funding, it’s important to make sure your small business is incorporated, and that you’ve chosen the right business structure for your future goals.”