Crowdfunding: Oh Great, Now Anyone Can Invest In An Indiegogo Campaign

Crowdfunding site Indiegogo has partnered with equity crowdfunding startup Microventures to allow anyone to invest in startups.

The comment sections of crowdfunding sites are almost as bad as YouTube. For every crowdfunding campaign that ships on time, you’ll find dozens that don’t. Thousands of people are angry their Bluetooth-enabled Kitten Mittens won’t be delivered before Christmas. Deep in the comments for these ill-conceived projects, you’ll find a common thread. The backers of these projects invested, and they demand a return. This, of course, is idiotic. Backing a project on Indiegogo or Kickstarter isn’t an investment. It is effectively burning money with the hope Kitten Mittens will eventually show up in your mailbox. Until now.

For an actual investment, there are regulations that must be met. The groundwork for this appeared last year when the Securities and Exchange Commission (SEC) introduced rules for equity crowdfunding. These rules include limitations on how much an individual may invest per year (a maximum of $2,000 or 5% of income, whichever is greater, for individuals with an income less than $100,000 per year), how much money these companies can raise ($1M in a 12-month period), and how an individual can invest in these companies.

Right now, the startups shown on Indiegogo and Microventures include an MMORPG, a distillery and cocktail bar in Washington, DC, a ‘social marketplace for music collaboration’, and a Bluetooth-enabled supercapacitor-powered “Gameball™”. All of these projects actually have documentation, and while the legitimacy of each crowdfunding project is highly dependent on the individual investor, there is a lot more data here than your traditional Indiegogo campaign.

This isn’t fire and brimstone and physics-defying electronic baubles raining down on the common investor, as you would expect from a traditional crowdfunding site tapping into the SEC rules on equity crowdfunding. This is, after all, only a partnership between Indiegogo and Microventures, one of the investment ‘funding portals’ that grew out of the equity crowdfunding regulations. In short, putting an investment opportunity up on Indiegogo will require more effort than a project that is just a few renders of a feature-packed smartphone or a video game with stolen assets.

If anything, this is just the continuation of what we’ve had for the past year. Since the SEC released the final regulations for equity crowdfunding, there have been a number of startups wanting to get in on the action. This partnership between Microventures and Indiegogo was perhaps inevitable, and we can only wonder who Kickstarter is about to team up with.

18 thoughts on “Crowdfunding: Oh Great, Now Anyone Can Invest In An Indiegogo Campaign

    1. If you meet the qualifications for being an “accredited investor,” (if you need to look up what they are, you don’t qualify) you can do pretty much anything you want, it seems.

      This is just another way the Internet is streamlining the economy. You used to have to jump through a bunch of hoops to bring a startup to the IPO stage before you could fleece hopeful retail investors to shove money into the pockets of the few at the top of the startup pyramid. Now, the barriers to entry are being lowered so everyone can do it. Hurray, efficiency.

      That being said, I have an upcoming campaign that you’ll all be kicking yourselves if you don’t get into very early on…

      1. I am streamlining the economy. Seriously though, the stated goal of the SEC is to protect investors from themselves. The idea being that retail investors lack the insight and liquidity to be able to judge their own investment decisions or even do their own due diligence. Given how many crowd sourced ideas continue over and over again to completely fleece potential buyers, there might be some merit to that idea. That said, I also support the idea of allowing limited investment as well. It’s a balancing act, trying to both foster access to capital but also protect the end consumer, who in the end winds up benefitting as a whole when the capital markets actually do open up.

        Also, you see this recent(ish) rise in 3d printing “for the masses”? Capital was not the bottleneck there. I will let others posit what the issue was there, though it seems to be fairly obvious.

  1. Does anyone know if there have ever been any companies that did a Kickstarter product that ended up being a valuable company in their own right? It seems like the big “successes” were victims of their own fundraising success (e.g. The Coolest Cooler, Twine, Peachy Printer, etc.). I don’t know if any of these have ever gone on to be an ongoing company worth any money that would result in a nice investment. Maybe Pebble is still worth something today?

    1. Fundrise, a real estate crowdfunding site that has raised $100 million. A nontraded REIT, the Fundrise REIT will not be traded on an exchange, and liquidity will be limited to quarterly, meaning investors will be able to sell their shares four times a year. The portfolio, which will be constructed as investor dollars come in, will include mortgage instruments that are already on the Fundrise platform as separate crowdfunding investments.

      Elio Motors – the startup automaker with the space-age, three-wheeled car – has surpassed $1 billion market valuation, days after becoming the first equity-crowdfunded company to list its shares on the public markets.

      The lofty valuation, $1.3 billion at close of trading on Monday (back in March of 2016), is the latest sign of success for crowdfunded companies after years of twists and turns following the 2012 JOBS Act, which was intended to increase funding for entrepreneurs and small businesses during the recession.

      In the annals of crowdfunding, Elio was a standout: Its high-profile campaign on crowdfunding platform StartEngine raised $17 million from 6,600 investors.

      Their market cap is back to 415.29M as of today.

      http://www.cityam.com/253769/crowdfunding-ipo-16-months-edinburgh-tech-company-claims-uk

      Freeagent, a cloud-based software-as-a-service accounting software company, is believed to be the first UK firm to launch an initial public offering (IPO) having previously raised growth capital through equity crowdfunding. The firm raised £1.2m from 700 investors on Seedrs in July 2015.

      Unclear if there have been crowd funded PRODUCTS that have turned into crowdfunded COMPANIES. It seems like a different set of skills to go from developing a product into developing it into something to be manufactured to creating a team to create more products into creating a company around teams of people. It happens though but plenty of products do not get off the ground and transition into manufacturability as the realities of how capital requirements change as you scale up are not always easily grasped. You cannot 3D print everything at scale. At least not yet.

  2. As an individual investor, I have to pay a fee and share whatever profits I might make with Indiegogo, Microventures, and everyone else who invested with me.

    More important, I have to pick the individual startups, thereby concentrating the risk that Microventures has spread across their entire portfolio.

    Couple that with the fact that ~90% of technology startups fail and the only remaining question is, “What could possibly go wrong?”

    Only the lesser fool can answer that question.

  3. Lets face it if you have a company with a real revolutionary product you don’t need a crowdfunder, there are plenty of smart investors out there who will stump up cash for something that is going to sell. There are a few crowdfunders that have delivered but most of them are flat out physics bending baloney.

    1. Not trying to come off as a d*ck or anything, but have you ever tried raising money from these “smart investors” you speak of? Without going into a long-winded rant about the absurd state of venture capital, I think you’d be surprised at how difficult it is to raise money for a real product with actual revenues.

      1. I suppose it can be hard but if your product really is great others will want a slice of the pie. If your product is ok then yeah you might have a hard time. I have done it myself in the past and got investment, it worked for me.

  4. “Backing a project on Indiegogo or Kickstarter isn’t an investment. It is effectively burning money with the hope Kitten Mittens will eventually show up in your mailbox.”

    Backing a crowdfunding project is buying the rewards, if the project people don’t want to be held liable for delivering on their goods then they shouldn’t have put it up as a reward in the first place. They can deliver something that’s different and inferior to what that was promised, but to take the money and run away or say that they can’t deliver is nothing short of fraud.

  5. Most of these campains honestly i dont understand. It isnt investing it is buying something that isnt even finished yet. You might as well wait till when or if it becomes available and then order it.
    Many of the things I see on such sites are projects that I wonder why anybody would ‘invest’ or rather ‘pre-order’. I recall ‘a book on pizza’s’. WTF go to Barnes&Nobles or Amazon. Plenty of books with pizza recipes.
    And why would anybody ‘invest’ just to get ‘thanks’ or his name printed somewhere. That is not investing as you get no shares, that is charity, or being dumb enough to be scammed

    1. That may often be the case, however it *does* cost (a lot) of money to “make” things. Real, tangible, physical things. And unfortunately, not everyone has a pile of money sitting around to invest in tooling and prototypes. It’s risky on both sides, but the “creator” has an exponentially higher level of exposure than the backer who didn’t get their $12 socks on time…

      There is nothing ‘charitable’ about backing a project that you are so enamored with that you’re willing to “risk” a little bit of your money in hopes that the dream – both theirs and yours – will actually (someday) become a reality. And in reality, most people probably don’t really care about the success of the ‘company’ – they care about getting a) what they ordered/were promised and b) being a part of something, be it a community/initiative/movement/whatever.

      There is no better attitude for killing great ideas and inventions than: “I’m going to sit back and wait, just let me know when it’s successful” (which, coincidentally, is how 99% of “investors” think).

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