In April 2012, President Obama and Congress passed the Jumpstart Our Business Startups (JOBS) Act in support of entrepreneurship and small business growth. The JOBS Act is designed to encourage small business and startup funding by easing federal regulations and allowing individuals to become investors.
Since the passing of the JOBS Act, there has been an increase in the usage of crowd funding platforms such as Kickstarter, Indiegogo and Fundable. Crowdfunding allows business to accept small contributions from private individuals, without making an initial public offering – giving regular people the chance to become investors – whether this be friends, family, a colleague, whoever.
The secret to Crowdfunding is figuring out how to build a group of “supporters” or “followers” before, during, and after your startup launches. Social media has played a major role in the way we market our products and connect with our customer base, Crowdfunding and the sourcing thereof, will change the way that we start businesses and build our consumer base from the ground-up. It works on the principle that you can generate as much as $75,000 in capital in one year by asking 5,000 individuals to donate, give or invest $15 each, rather than getting the same capital investment from a few higher nett-worth investors and losing some control in the process.
These platforms have helped fund everything from startups, film and music projects, non-profits, and all types of small businesses in between. While the jury is still out on the long-term viability of these endeavours, Crowdfunding is definitely here to stay. At the signing of the JOBS Act, President Obama had with him on stage, Indiegogo success story, Emmy’s Organics from New York, as a prime example of how Crowdfunding can create new business growth. The founders of this gluten-free dessert company were initially turned down by local banks before they raised $15,000 on Crowdfunding website, Indiegogo, to update their packaging and expand distribution to 26 states.
Gerber says revolutionary changes in 2013 will radically change business financing as we know it: “Any type of business will be able to go online to raise significant funds and thus avoid dealing with banks and demanding investors all together.” The U.S. Securities and Exchange Commission will roll out rules for Crowdfunding as a formal investment method, to encourage funding of United States small businesses by easing various securities regulations.