One of the greatest tools an entrepreneur can wield is crowdfunding. At any stage of business. A startup can get validation of their ideas with a ‘rewards’ crowdfund site, which gives them greater leverage to work with additional investors through a follow-up equity crowdfund site.
And a productive ‘reward’ crowdfunding raise (which usually offers product pre-orders) is turning into the normal preface to the raising of lots of equity investment cash from savvy investing angels who are looking for equity stakes in an enterprise.
Before there was crowdfunding, investing angels could usually be found only through an entrepreneur’s own personal network -- that is, friends and family, plus intimate business associates. That’s how the capital was exploited after the Securities Exchange Commission stepped in to choke off public solicitation of funds during the Great Depression. This chokehold was lessened by President Obama in 2012, and that’s when equity crowdfunding really took off and became a financial dynamo for entrepreneurs.
Equity crowdfunding has advantages for both the entrepreneur and the investor. It gives an unusual push to investing angels and allows them unprecedented communication to what’s called ‘deal flow.’ So they no longer are limited with the time eating personal meetings and semi-gossip dealmaking. Crowdfunding lets them securely review potential deas by any number of criteria -- including by traction, industry, or even through a platform like Fundable.
Investing angels nowadays are likely to be white collars such as lawyers or doctors, or even veteran entrepreneurs who are interested in putting something into other companies and possibly being a mentor to newer entrepreneurs as well. It’s estimated that this group invests well over twenty billion dollars in a quarter million startups each year. And with services like NextGen Crowdfunding available, there’s not much of a barrier to entry to start investing. Of course, the SEC does have some standards for accredited investors -- such as having a bona fide net worth of over one million in US dollars, and be able to show proof of annual income in excess of two-hundred thousand a year.
So who’s using crowdfunding today? Here’s a quick peek at a few of the more successful angel investors who are dedicated to crowdfunding sites:
He’s the founder of Opsmatic and and Equinix, among other successful startups. He usually keeps an eye on the crowdfunding site Kickstarter for his investments.
Matt, of course, is famous for getting in on the ground floor of WordPress. By his own admission, he is ‘deeply into’ rewards crowdfunding.
A former VP at both Google and Twitter, Elad is currently investing in Formlabs -- a low cost 3D printer startup that is using crowdfunding very aggressively to accumulate nearly three million dollars in seed money so far.
Busey has started several companies that were recently acquired by Zynga and Demand Media -- so he’s now in the chips and looking for a good home for his money. He’s a primary investor, through equity crowdfunding, in the home automation field.
He is the creator of Saba Software and is a dedicated investor through crowdfunding sites for the past twenty years. His most recent investments are connected with home security companies.
He’s founded over five hundred startups. A former marketing director at PayPal, McClure is currently on the board of directors of the crowdfunding site Fundable.
The founding CTO at Yahoo for over eleven years, Nazem is now an angel investor heavily involved in wristband health monitoring devices and follows several crowdfunding sites very closely to see where he can do the most good with his wealth in the mobile health monitoring field.